Tag: Motley Fool

The Westpac Banking Corp (ASX: WBC) share price has lagged peers and underperformed benchmarks in 2022. The ASX banking share has posted a 16% loss in the past year.

Shares in the banking major join its rivals in what’s been a fairly tumultuous year for the sector.

After starting off with a bang, a mix of tightening monetary policy and the subsequent impact on interest rates has clamped down heavily on ASX banks. The Westpac share price hasn’t escaped the squeeze.

For instance, the VanEck Australian Banks ETF (ASX: MVB) – one proxy to examine movements specific to Aussie banks on the chart – is down 3.5% this YTD.

Underperformance amid inflation turbulence

Following United States CPI (consumer price index) and headline inflation data readouts last night, the ASX and its fellow Australia-Pacific exchanges are set to feel the impulse at the open today.

There’s no denying that 2022 has been a year. The market narrative has been dominated by that of inflation and central bank tightening.

This includes each of the US Federal Reserve, European Central Bank (ECB), Central Bank of Japan (BOJ), the Bank of England (BOE), and the Reserve Bank of Australia (RBA) committing to raising their policy rates in order to tackle inflation.

For Westpac, it has been a serial underperformer up to this year. And trends have remained in situ from January to date.

Despite this, Westpac shares actually have a fairly robust level of buying support, forming the bedrock for the bank to make a turnaround should enough investors pile in.

In his speech to the Anika Foundation last week, RBA Governor Dr Philip Lowe said the recent lift in inflation had come as a “surprise”.

The RBA is now “expecting CPI inflation this year to be around 7.75%” Lowe said – “a very big change and a very large forecast miss”.

Can the Westpac share price turn it around?

Curiously, the Westpac share price has caught a bid in the days following, suggesting the market was at least craving some sort of clarity on the inflation number – even if it was high.

Analysts at Goldman Sachs recognise that Westpac has potential to embark on a turnaround, now with the bank’s cost targeting initiatives, wider net interest margins (NIMs), and current multiples it’s trading at.

“Westpac now offers the most upside of the banks over the next 12 months,” the broker said.

“Beyond this, we note the stock is trading at a 20% discount to peers, versus the historic average 2% discount,” it added.

Meanwhile, Morgan Stanley predicts the bank to push its FY22 and FY23 dividend to $1.25 and $1.30, respectively.

Both brokers rate Westpac a buy, bringing the list to six out of 15 analysts recommending to buy the Westpac share price. That’s up from five in June, according to Refinitiv Eikon data.

The consensus price target from this list is $24.30, suggesting a small amount of upside should the group have it correct.

As for the turnaround story – it remains to be seen what Westpac and its share price will deliver this financial year. It has a mountain to climb, along with the other banking majors, and so it will be an interesting set of numbers to follow throughout the year.

The post Down 16% in a year, can the Westpac share price become a successful turnaround story? appeared first on The Motley Fool Australia.

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More reading

• What will the Westpac dividend be in 2023?
• Billions in liabilities could be set to hit CBA and other ASX banks: expert
• Westpac shares stepped into the green today amid RBA’s softer tone
• Why is the NAB share price diving more than the other big 4 ASX banks today?
• Why rising rates are a ‘sugar hit’ for ASX 200 bank shares: Macquarie

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

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It’s a rough day on the market for the BHP Group Ltd (ASX: BHP) share price as the S&P/ASX 200 Index (ASX: XJO) crumbles under the weight of Wall Street.

New York-based indexes tumbled overnight amid the release of hotter-than-expected inflation data.

And their suffering is dragging on the Aussie bourse. The ASX 200 is down 2.72% shortly after open while the S&P/ASX 200 Materials Index (ASX: XMJ) has dumped 2.65%.

The BHP share price hasn’t managed to escape the carnage. It’s trading at $38.52 right now, 1.98% lower than its previous close.

But top broker Macquarie has doubled down on the stock, reportedly upping its price target for BHP shares by 5%. However, others have taken a swing at iron ore.

Let’s take a closer look at what brokers are expecting from the ASX 200 materials giant.

Top broker tops 9% upside for BHP share price

The BHP share price is suffering amid a broader market downturn on Wednesday despite bullish sentiments from a top broker.

Macquarie has upped its expectations of coking coal – otherwise known as metallurgical coal – and companies that produce it, The Australian reports.

The broker is said to have lifted its expectations for the commodity’s value to US$350 a tonne in 2023 and boosted its long-term forecast to US$200 a tonne. Though, it has also reportedly dropped its forecast for the December quarter to US$310 a tonne.

Its bullish outlook is reportedly due to an underinvestment in supply and India’s dependency on coal imports and comes despite falling demand for steel.

BHP’s coal segment brought in US$15.5 billion of revenue last financial year. It saw an average realised price of US$347.10 per tonne of coking coal – a 225% year-on-year improvement.

On the back of its bullish outlook for coal, Macquarie has reportedly lifted its price target for BHP shares 5% to $42. That represents a potential 8.94% upside.

On a less positive note, however, Fitch Solutions has dropped its near-term expectations for iron ore, the Australian Financial Review reports.

The firm is said to have dropped its outlook for 2022’s average iron ore price by US$15 to US$115 a tonne.

That’s expected to fall to US$100 a tonne in 2023, and by an additional US$10 a tonne every year thereafter until 2025.

Its bearish expectations are reportedly due to recovering inventories and slowing growth in major economies.

The post The BHP share price is tumbling today, but here’s why Macquarie is bullish appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 shares tumbling like dominos on Wednesday?
• Why harpooning Oz Minerals could be ‘beneficial’ for BHP shares: fundie
• Why is the BHP share price booming on Monday?
• Why A2 Milk, BHP, Lovisa, and Nickel Industries shares are charging higher
• How big will the BHP dividend be in 2023?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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Are you ready to be caught with your pants up?

Huh?

Let me explain…

I want to take you inside the tent for a few minutes.

Behind the curtain.

Some of you reading this will be members of Motley Fool services. Others aren’t.

But I’m going to share something that’s usually reserved for members.

The last 12 months or so have been… tough.

See, the market tends to go through cycles.

Up until COVID-19, it was feeling pretty optimistic. Exuberant, even.

Then, after the fastest bear market in history, in March 2020, we had the fastest recovery in history.

And the exuberance returned.

And then, somewhat ironically, almost in tandem with the announcement of a COVID vaccine, the markets shifted gears.

Gone was the love of high-growth companies and online winners, in favour of some old favourites, mostly banks and mining companies.

Then, as rates began to rise, that loss of love became downright disdain.

Some of the high flyers became, well, fast-fallers.

I’ve written before about the vertigo-inducing crash of shares in companies like Zip Co Ltd (ASX: ZIP), currently down 92% from its all-time high less than 18 months ago; and Whispir Ltd (ASX: WSP), down 82% since this time two years ago.

Investors abandoned growth companies because of valuations. Or lack of profitability. Or the time they’d take to become really profitable, given rising rates.

All of these reasons are plausible.

Kind of.

The super-profitable search behemoth, Google, is down 25% in less than a year (I own shares, for the record).

Warren Buffett’s company, Berkshire Hathaway (ditto), is off 20% in less than six months. To say that it’s not known for its tech investments is something of an understatement.

My point?

Well, a few points, actually.

Firstly, some strong, high-quality businesses have lost decent amounts of value recently.

Smaller, less-proven companies have been belted from pillar to post.

Turns out, volatility happens.

(I know… who knew? But more seriously, these are some very significant examples, from all parts of the market and the world.)

Second, every time a share price moves, that movement is one part fundamentals (profits, cash flows, growth, etc) and one part sentiment (how much traders love or hate the company in question, or whole sectors… sometimes even the whole market!).

Those parts, though, aren’t always equal.

I’ve said before that I think Zip’s historical high prices were massively overblown. Like a hang-glider on a good day, the share price flew into an almighty updraft of irrational exuberance. Then, as I cleverly and almost imperceptibly change metaphors, like Icarus, it flew too close to the sun and came crashing back to Earth.

Did the company’s fundamentals change? Not really. Yes, the external environment (inflation and rates) changed, but that can’t explain a $12 share price falling to less than $1.

And those other shares?

Again, perhaps a little bit of fundamental influence, but – I would humbly suggest – probably larger licks of market sentiment. In this case, nervousness, expressed as lower prices.

Now, with hindsight, I can tell you precisely the right times to buy and sell.

I still can’t tell you exactly what traders were thinking or when they might change their minds… but we can see the result in share prices.

But because that future is inherently unknowable… it’s a mug’s game to try to predict it.

Why?

Well, self-evidently because it’s not predictable!

But also because we choose to play a different game – one that’s been very profitable over the long term.

The example I usually use is Amazon (I own shares) – the company whose shares have fallen more than 50% from their highs about two-dozen times since it was listed on the NASDAQ in 1997 – and, in the meantime, has gone from US$0.09 to US$139.00.

An impressive example, no?

But there are others.

Cochlear fell from $80 to $55 after a product recall. It’s now $215.

CBA dropped from $60 to $26 during the GFC. It fell from $90 to $59 during the COVID crash. It’s now $97.

Sure, I’d have loved to sell at those highs and buy back at the lows. The problem, as you’ll know (or work out if you think it through logically), is that there’s no way to know those highs and lows at the time.

And, as I’ve written before, I recommended our members sell Domino’s Pizza Enterprises Ltd (ASX: DMP) (yep, own them, too) in 2013 for a 60% profit.

Which sounds smart… until you realise that was at $13 a share, and they subsequently went to $140. Even at today’s price of $65, I gave up on a five-fold return.

And that last one might be the best example.

Yes, I sometimes sell too late (or not at all, but miss the opportunity to sell at higher prices). But that missed five-fold return could have covered 5 different companies that lost 100% each!

Now, I’ve never had a 100% return. So maybe it could have covered 10 companies that lost 50%. Or 25 companies that lost 20%.

You get the picture.

Yes, selling too late can feel painful. But it’s far, far more costly to miss out on the ones that gain 2, 5 or 10 times in value.

But that can take something really important – and difficult for the impatient investor: time.

So, let’s put that all together.

And put a bow on it, courtesy of a recent email I received from a member.

He was disappointed that our recommendations have lost value over the past year or so.

My inference is that he wanted us to be able to read the tea leaves, trading in and out of companies and sectors with perfect foresight.

Or (I think it was ‘and’, actually) he wanted us to take profits more frequently and to limit losses.

They aren’t unreasonable requests.

But they’re incongruous with the approach we’ve taken here since 2011 and our sister company in the US has taken since 1993.

We are unashamedly long-term focussed investors. Because we think that’s the best way to put the odds meaningfully in our favour.

And we’re slow to sell because we realise that such an approach gives us the best chance of letting those 2, 5 and 10-fold returns happen.

Along the way, we’ll have losses and disappointments. We collectively (and I personally) hate that, on our members behalf.

We’d love to avoid it.

But in our experience, trying to avoid the losers can also rob you of the chance to bank meaningful winners.

(And if you’re wondering, almost every share I own is a Motley Fool recommendation, and my portfolio is also meaningfully down since its highs 12-18 months ago.)

Could we have avoided the falls? Maybe. With a lot of luck. But I don’t think so.

I think Berkshire, Google and Amazon will go on to achieve new all-time highs. And more after that. And more after that.

Sure, I could try to buy and sell, hoping to make a few extra bob with lucky timing.

But would I try it and risk losing out on the compound gains that I think will happen as the companies execute on their plans and the market recovers its confidence?

Not a snowflake’s chance in hell.

That means I need to be patient.

It means I need to accept volatility.

It means there’ll be periods – may be long periods – of underperformance.

But if I can make my peace with that, I think it gives me — and you – the best chance of market-beating returns.

If you’re a Motley Fool member, I hope that both informs and reassures you.

If you’re not, I hope it gives you some insight into how we invest, but also some ideas on how you might invest your own money.

At the end of the day, democratic capitalism’s best days are ahead of it.

Or, more pithily, as Peter Lynch said, “I’m always fully invested. It’s a great feeling to be caught with your pants up.”

Fool on!

The post It’s going to be bumpy… but worth it appeared first on The Motley Fool Australia.

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More reading

• Expert predicts stock market will crash 20% lower in the next four weeks as US inflation rages out of control
• Why is the Coles share price tumbling today?
• Here’s why the Altium share price is crashing 7% lower today
• Why are ASX 200 shares tumbling like dominos on Wednesday?
• Why the Telstra share price could actually be a growth opportunity: fundie

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Scott Phillips has positions in Alphabet (C shares) and Dominos Pizza Enterprises Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Whispir Ltd, and ZIPCOLTD FPO. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Dominos Pizza Enterprises Limited, and Whispir Ltd. 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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Overnight Tuesday, the Dow Jones Industrial Average slumped nearly 1,300 points lower after US inflation came in higher than expected. It was the market’s worst day in more than two years.

The ASX 200 has fallen sharply in early Wednesday trade, with heavy losses sustained by the Fortescue Metals Group (ASX: FMG) share price, the Commonwealth Bank of Australia (ASX: CBA) share price, and the Pilbara Minerals (ASX: PLS) share price.

The US inflation print came in at 8.3%, up 0.1% from July, when markets had expected it to fall, largely on the back of lower gasoline prices.

The unexpectedly hot inflation print essentially locked in a 75 basis point increase next week when the US Federal Reserve next meets. According to Bloomberg, the odds for a 100 basis point rate hike jumped more than 20%, with hopes of a “Fed pivot” firmly dashed.

Goldman Sachs sees a more aggressive Federal Reserve and now predicts US interest rates to hit 4 – 4.25% by the end of the year. The current funds rate is 2.25 – 2.5%.

With inflation being the number one enemy, central banks have no option but to keep hiking interest rates until such time that it is back under control. And with US inflation running at over 8%, it’s a long way back to the target rate of 2%.

The risk is the sharpest increase in interest rates in many decades slams the US economy into recession, taking the stock market further down with it.

Jeffrey Gundlach, chief investment officer of DoubleLine Capital, is worried the Fed will go too far.

As reported on Bloomberg, Gundlach told CNBC he prefers the Fed hikes only 25 basis points next week because it hasn’t paused long enough to see what effect previous hikes have already had. He fears the Fed might oversteer the economy, potentially sending it into recession. 

Gundlach agrees with calls from others, including Scott Minerd from Guggenheim, that stocks will decline 20% by mid-October. 

If replicated here in Australia, it would see the ASX 200 crash all the way down to around 5,500, a level not seen since the COVID crash of March 2020.

The post Expert predicts stock market will crash 20% lower in the next four weeks as US inflation rages out of control appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 shares tumbling like dominos on Wednesday?
• Why this fund manager is not banking on CBA shares right now
• 3 ASX 200 mining shares that smashed all-time highs on Tuesday
• Why did the Core Lithium share price leap another 6% on Tuesday?
• Fortescue’s Twiggy piles $120m into junior miner slated for ASX listing

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

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The Coles Group Ltd (ASX: COL) share price is trading lower on Wednesday.

At the time of writing, the supermarket giant’s shares are down almost 3% to $16.83.

Why is the Coles share price falling?

There have been a couple of catalysts for the weakness in the Coles share price on Wednesday.

The first is broad market weakness following a shocking night of trade on Wall Street.

US stocks had their worst session in over two years after economic data revealed that inflation isn’t easing. This defied expectations and sparked fears that aggressive interest rate hikes will be required.

What else?

Also weighing on the Coles share price has been a broker note out of Goldman Sachs this morning.

According to the note, the broker has downgraded the company’s shares to a sell rating with a reduced price target of $15.60.

The broker made the move on the belief that Coles could lose market share due to being a laggard in respect to digital transformation. It also fears that the company’s margins could be pressured as it enters into a high investment cycle.

Goldman explained:

Downgrade COL from Neutral to Sell with new TP of A$15.60/sh, implying 9.5% share price downside due to laggard in digital transformation resulting in market share losses and entrance into high investment cycle for digital and supply chain pressuring margins over FY23/24. Our FY23-25e NPAT is cut by 2.4%-8.9% to reflect lower comp growth as higher digital transformation related opex. Our TP implies FY24 P/E of 20.0 vs historical average of 21.5.

The post Why is the Coles share price tumbling today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Supermarket shakeup: Do Coles shares offer better dividends than Woolworths?
• Top ASX dividend shares to buy in September 2022
• Why is top broker Citi tipping 17% upside for the Coles share price?
• Are Coles dividends better than a savings term deposit?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. 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 Altium Limited (ASX: ALU) share price is having a difficult day.

In early trade, the electronic design software company’s shares are down 7% to $35.50.

Why is the Altium share price dropping?

Investors have been selling down Altium’s shares for a couple of reasons this morning.

The first is a market selloff driven by significant weakness on Wall Street last night after US inflation failed to cool as some were expecting.

The tech-focused NASDAQ index was hit hardest and recorded a 5.2% decline. This has unfortunately rubbed off on the local tech sector today, with the S&P/ASX All Technology Index down 3.9% at the time of writing.

What else?

Also putting a bit of pressure on the Altium share price has been a broker note out of Bell Potter this morning.

Although the broker remains a big fan of the company, it decided to downgrade Altium’s shares to a hold rating with an improved price target of $40.00.

Bell Potter made the move on valuation grounds following a strong gain in recent weeks. It explained:

At our updated PT of $40.00 the expected excess return is <15% so we downgrade our recommendation to HOLD. We continue to be positive on the outlook for Altium but now see the stock as around fair value trading on an FY23 EV/EBITDA and PE ratio of 36x and 58x. We also see a lack of short term potential catalysts for the stock given Altium does not tend to make many announcements outside of results and we do not expect the company to upgrade its guidance at the AGM in November given it will still be relatively early in the financial year. In our view the key risk to our downgrade is the company makes an accretive and/or strategic acquisition of reasonable size which seems a possibility especially with the strong Balance Sheet.

The post Here’s why the Altium share price is crashing 7% lower today appeared first on The Motley Fool Australia.

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More reading

• Steady compounders: 3 ASX 200 shares that have delivered over a decade
• Down 15% this year, why I’m not selling out of this ASX 200 tech share
• Analysts name 3 ASX growth shares to buy next week
• Why analysts rate these ASX growth machines as buys
• Why did the Altium share price lag the ASX 200 today?

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

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The S&P/ASX 200 Index (ASX: XJO) is a sea of red on Wednesday morning.

In early trade, the benchmark index is down a very disappointing 2.6% to 6,829.5 points.

Why is the ASX 200 index being sold off?

Investors have been selling off ASX 200 shares on Wednesday following a shocking night of trade on Wall Street which saw the Dow Jones fall 3.9%, the S&P 500 drop 4.3%, and the Nasdaq sink a massive 5.2%.

This was the worst night of trade on Wall Street since June 2020 and was driven by panic selling from investors after economic data revealed that US inflation failed to cool during August.

Investors had been optimistic that inflation had peaked and interest rates would not need to increase as aggressively as feared. However, that has been thrown out of the window now, with the market bracing for higher rates.

The worst performers on Wall Street were tech stocks, with Meta and Nvidia falling particularly heavily.

Unsurprisingly, this has led to our own tech sector coming under significant pressure today. The likes of Life360 Inc (ASX: 360), Block Inc (ASX: SQ2), and Zip Co Ltd (ASX: ZIP) have all fallen materially this morning. This has led to the S&P/ASX All Technology Index dropping a sizeable 3.9%.

But it isn’t just the tech sector that is falling. ASX 200 shares in the resources sector, such as BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Pilbara Minerals Ltd (ASX: PLS), are also deep in the red this morning.

Even the banks are taking a bath on Wednesday. This has seen the Commonwealth Bank of Australia (ASX: CBA) share price lose 3% of its value in early trade.

While these declines are hard to take, when the dust settles, there could be some very attractive buying opportunities for investors.

The post Why are ASX 200 shares tumbling like dominos on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• Why this fund manager is not banking on CBA shares right now
• 3 ASX 200 mining shares that smashed all-time highs on Tuesday
• Here are the top 10 ASX 200 shares today
• Why did the Core Lithium share price leap another 6% on Tuesday?
• Fortescue’s Twiggy piles $120m into junior miner slated for ASX listing

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

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The Telstra Corporation Ltd (ASX: TLS) share price has gone through a journey over the last few years. However, with the worst of the NBN profit hits behind it, is the telco giant now going to start delivering growth?

Telstra is one of the largest blue chips on the ASX with a market capitalisation of $46 billion according to the ASX.

The fund manager Perennial believes that Telstra is displaying characteristics that “bode well for earnings and returns”.

Perennial has taken this view after examining the telco’s FY22 result. Let’s have a quick look at that report.

FY22 earnings recap

Telstra reported that its total income declined by 4.7% to $22 billion. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew 8.4% to $7.3 billion while underlying earnings per share (EPS) jumped 48.5% to 14.4 cents. On a guidance basis, the free cash flow increased 5.9% to $4 billion.

The board also decided to increase the dividend from 8 cents per share to 8.5 cents per share. An annualised dividend per share of 17 cents would be 6.1% at the current Telstra share price.

Outgoing Telstra boss Andy Penn described the mobile result as “outstanding”. Mobile EBITDA rose by 21.2%, with 2.9% postpaid handheld average revenue per user (ARPU) growth and 6.4% mobile services revenue growth. The telco said it added 155,000 net retail postpaid handheld services. There were also one million internet of things (IoT) services added, along with 218,000 wholesale services.

Telstra Health saw revenue rise 51% to $243 million after including acquisitions. Management said it’s on track to become a $500 million revenue business by FY25.

Management said that in FY23, total income is expected to be between $23 billion to $25 billion. Underlying EBITDA is predicted to come between $7.8 billion to $8 billion.

Why is Perennial positive on the Telstra share price?

Perennial said that the mobile business showed “good growth”. It went on to describe its optimistic view on the business:

With the NBN roll-out now completed, the company will no longer be facing earnings headwinds as broadband subscribers transition from its network to the NBN at much lower margins. This is likely to mark an inflection point in earnings, with the mobiles division driving positive group earnings growth. The recent merger of TPG with Vodafone has locked in an oligopoly structure in the mobiles market. As a result, we are now seeing more rational pricing, as well as other forms of cooperation such as network sharing agreements – all of which bode well for earnings and returns.

Telstra recently announced that it would be increasing mobile prices for many customers in line with CPI inflation.

Telstra share price snapshot

At the time of writing, Telstra shares have dropped 1% in the past month.

The post Why the Telstra share price could actually be a growth opportunity: fundie appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. 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.

What happened

If there is a single watchword that defines 2022, it would be inflation. Consumers and investors alike have been looking for signs that rising prices will eventually ease.

When the latest government report on inflation hit the wire Tuesday morning, it revealed that while prices weren’t increasing as quickly as they had been, the news was still worse than expected, sparking a wide-ranging sell-off on Wall Street.

With that as a backdrop, shares of Nvidia Corporation (NASDAQ: NVDA) tumbled as much as 7.8%, Amazon.com, Inc. (NASDAQ: AMZN) slumped as much as 6%, and Apple Inc. (NASDAQ: AAPL) slipped as much as 4.5%. As of 12:45 p.m. ET, the trio were still trading lower, down 7.5%, 5.1%, and 4.2%, respectively.

To be clear, there was little in the way of company-specific news driving these technology stocks lower — and what could be found was decidedly positive. This suggests that investors were hyperfocused on the macroeconomic data and what it means for the future.

So what

The monthly report from the U.S. Bureau of Labor Statistics laid out the state of inflation during the month of August, and things were even worse than many expected. The Consumer Price Index (CPI), the most widely followed government measure of inflation, increased 0.1% for the month and rose 8.3% year over year.  

To give this number context, it’s lower than the 8.5% that prices increased in July. Unfortunately it was also worse than the 8.1% forecast issued by economists. The “core” data, which strips out highly volatile food and energy prices, still climbed a miserable 6.3% over the preceding 12 months.

If there was a silver lining in the cloudy inflation data, it was that energy prices continued to ease off recent highs, declining 5% for the month. The biggest contributor to the drop was lower prices at the pump, as the gasoline index fell by a hefty 10.6%.

The declines were more than offset by increases in many basic necessities, including higher food prices, which notched an 11.4% increase year over year, the largest yearly increase since 1979.

Now what

The persistent inflation is weighing on investor sentiment, but even as this dreary macroeconomic data gave them pause, there is actually some positive company-specific data that suggests investors should actually consider buying these stocks.

Reports suggest that Nvidia and Taiwan Semiconductor Manufacturing are working on a solution that would daisy-chain multiple graphics processing units (GPU) together in a new way, which would be deployed for artificial intelligence (AI) uses. This could help fuel Nvidia’s sales, as the company has been increasingly focused on technology used in cloud computing, data centers, and AI, which has quickly become one of the company’s biggest growth engines. 

In the case of Apple, early presale data for the iPhone 14 suggests robust demand. Over the past couple of days, various analysts tracking the data have reported that wait times are growing for the iconic device. History suggests that longer ship times correlate with strong demand.

Early Tuesday, noted Apple follower Evercore ISI analyst Amit Daryanani joined that chorus, noting that lead times are long, particularly for the iPhone 14 Pro, Pro Max, and Plus models, according to The Fly. The data suggests that consumers are opting for these higher-priced models, which could have a materially positive impact on the average selling price (ASP) of iPhones — and Apple’s margins.  

For its part, Amazon announced the debut of the latest model of its Kindle e-reader. The entry-level model, which the company calls its “lightest and most compact,” comes with numerous upgrades, providing a tempting alternative for users looking to join the digital reading crowd or replace an existing e-reader.

Electronic devices represent just a small part of Amazon’s business, so it certainly won’t move the needle. That said, it helps make Amazon’s ecosystem stickier, attracting new customers and hanging on to existing ones. 

In the face of the ongoing Nasdaq bear market, shares of Nvidia, Amazon, and Apple are currently trading down 60%, 30%, and 14% off their respective highs. Furthermore, these industry leaders are currently selling at 10, 6, and 2 times next years’ sales, respectively, each near their lowest valuations in several years. Given that they dominate their respective industries and have a long track record of overcoming challenges — macroeconomic and otherwise — this might be a great opportunity to buy shares of these iconic companies at a discount.

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

The post Why Amazon and Apple stocks slumped Tuesday appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Amazon, Apple, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The Webjet Limited (ASX: WEB) share price has come through relatively unscathed so far this year.

While the S&P/ASX 200 Index (ASX: XJO) has printed a 7.6% fall, Webjet shares have outperformed by shedding just 0.2% since the start of the year.

Webjet’s financial year ends on 31 March, so the ASX 200 travel share released its FY22 results back in May.

More recently, the company held its AGM at the end of August, which was accompanied by a trading update. 

Webjet also held a strategy day last week, providing strategy updates across its different business segments.

With the travel recovery underway, are there blue skies ahead for Webjet shares, or could they hit turbulence?

Let’s get the lay of the land and see what a couple of leading brokers think.

Why Webjet shares could reach higher ground

On the back of Webjet’s AGM, analysts at Macquarie upgraded their rating on Webjet shares to outperform.

The broker noted that overall activity is tracking broadly in line with its forecasts. Meanwhile, earnings before interest, tax, depreciation, and amortisation (EBITDA) margins are approaching or above pre-COVID levels.

Explaining its upgraded rating, Macquarie said:

Solid trading update with profitability ahead of expectations that increases our confidence WEB will deliver and sustain a structurally lower cost base. Despite some macro risks on the horizon, the medium-term growth outlook is favourable and underpinned by market share gains, ongoing tech investment, and a full recovery in travel markets. 

Macquarie has a 12-month price target of $6.15 for Webjet shares. This implies potential upside of 13% from the current Webjet share price of $5.42.

The broker believes the key downside risk to its target price is the softer macroeconomic outlook reducing travel activity. 

Recovery flight path on track

As my Fool colleague James recently reported, analysts at Goldman Sachs are also bullish on Webjet shares.

After assessing Webjet’s recent trading update, the broker maintained its buy rating with a slightly trimmed price target of $6.80. This implies potential upside of 25% from current levels.

Two key positives from the update that stood out to Goldman were the continued strength in the execution of Webjet’s business-to-business segment and a stronger than expected cash flow outlook.

However, the broker is mindful that a slower-than-expected recovery in international travel is holding back Webjet’s online travel agency (OTA) business.

On the whole, the broker concluded:

Overall, we view travel recovery as trending in the right direction, albeit with hiccups in the trend and we believe WEB remains well positioned to capitalise on the recovery through their online OTA offer and more importantly the strengthening position in the Bedbanks market. 

In positive news for income-hungry investors, Goldman expects Webjet to resume paying dividends next year.

The post What are Webjet shares really worth in September? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Macquarie Group Limited and Webjet Ltd. 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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