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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Adairs Ltd (ASX: ADH)

According to a note out of UBS, its analysts have retained their buy rating but trimmed their price target on this homewares retailer’s shares to $3.40. UBS notes that Adairs’ performance in FY 2022 fell short of expectations due largely to a disappointing second half from its Mocka brand. However, with its shares falling heavily post-results, the broker sees enough value on offer here to retain its buy rating on the company’s shares. The Adairs share price is trading at $2.20 this afternoon.

Nick Scali Limited (ASX: NCK)

Analysts at Citi have retained their buy rating and lifted the price target on this furniture retailer’s shares to $14.62. This follows the release of a full year result which came in ahead of both the market consensus and Citi’s expectations. In addition, the broker was pleased to see that Nick Scali has started the new financial year in a positive fashion. This has led to Citi lifting its earnings estimates meaningfully. The Nick Scali share price is fetching $11.04 today.

Pilbara Minerals Ltd (ASX: PLS)

A note out of Macquarie reveals that its analysts have retained their outperform rating and $5.60 price target on this lithium miner’s shares. Although Pilbara Minerals delivered a softer than expected full year result that missed the broker’s estimates, it isn’t concerned. That’s because thanks to its strong production guidance and booming lithium prices, the broker suspects the Pilbara Minerals could triple its profits in FY 2023. The Pilbara Minerals share price is trading at $3.47 on Wednesday.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• Could Pilbara’s inaugural profit signal good times ahead for ASX lithium shares?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why Altium, Ansell, Monadelphous, and Pilbara Minerals shares are charging higher
• Why is the Allkem share price acing it on Tuesday?

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 ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. 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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All eyes will be on the Qantas Airways Limited (ASX: QAN) share price tomorrow as the company releases its full-year earnings.

And there’s plenty for investors to watch out for. Some brokers have tipped gains while others warn the airline might suffer on a period of poor service.

Qantas shares are currently swapping hands for $4.585, 0.77% higher than their previous closing price. For context, the S&P/ASX 200 Index (ASX: XJO) is up 0.51% right now.

Let’s take a look at what the market might be expecting to impact the stock.

Qantas shares will be in focus tomorrow…

The Qantas share price could be in for a big day tomorrow. The company’s full-year underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) is expected to come in at between $205 million and $305 million.

That considers the company’s guidance of between $450 million and $550 million of underlying EBITDA for the second half and its first-half underlying EBITDA loss of $245 million.

Meanwhile, Bell Potter predicts the airline will report a net profit after tax (NPAT) loss of $1.35 billion. Broker consensus sits at a $1.2 billion loss.

And broker Citi is bearish. It expects Qantas’ FY23 guidance to be muted after a tricky start to the period. It also expects the airline’s costs to lift. The broker reportedly placed a ‘sell’ rating and a $4.28 price target on Qantas shares.

More than 54% of Qantas flights departed late in July. Meanwhile, the carrier cancelled 5.6% of its services, the Bureau of Infrastructure and Transport Research Economic found. Over at its budget leg Jetstar, more than 52% of flights departed late and 8.8% were cancelled.

The airline has been open about such performance issues. It offered frequent flyers a $50 voucher and other goodies as a token of apology over the weekend.

But Transport Workers Union national secretary Michael Kaine said such incentives likely wouldn’t be enough to convince travellers – who generally pay a premium to fly Qantas – to return to the airline:

The thousands of passengers who’ve spent hours in call centre queues following cancelled flights, delays, and lost luggage won’t want to waste more of their time attempting to cash in a voucher to buy themselves more of the same chaos.

If Qantas management or indeed [CEO Alan Joyce] really cared about customers, the right thing to do would be to appoint a new CEO with the business acumen to bring back higher trained, experienced workers and treat them with respect.  

Citi also believes improvements in its performance will come down to staffing. Though, it thinks that will bring higher costs than the market expects.

But not everyone is so bearish. UBS has slapped Qantas’ shares with a ‘buy’ rating and a $6.55 price target, my Fool colleague Tristan reports.

The post Looking to buy Qantas shares? Here’s what to watch when the airline reports tomorrow appeared first on The Motley Fool Australia.

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More reading

• Wagners share price plummets 26% as FY22 net profit declines
• Why are ASX 200 tech shares having such a cracker of a day?
• HMC Capital share price jumps 9% on explosive results
• WiseTech share price surges 11% on record profits
• Netwealth lifts full-year dividend on record inflows

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 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 Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is soaring today on the back of the company’s financial results.

But how did the Domino’s dividend stack up compared to previous years, and when will it be paid?

The Domino’s share price is currently rising 6.87% and trading at $71.68. For perspective, the S&P/ASX 200 Index (ASX: XJO) is rising 0.48% today.

Domino’s dividend

Domino announced today it will pay a final dividend of 68.1 cents per share, 70% franked.

However, the Domino’s total dividend payout for FY22 is 156.5 cents per share. This is 10% less than the total dividends paid in FY21.

Last year, Domino’s shareholders received total dividends of 173.5 cents per share.

That said, the dividend announced today is higher than pre-COVID levels. In FY19, Domino’s paid total dividends of 115.5 cents per share, and a final fully franked dividend of 52.8 cents per share.

Domino’s today reported underlying net profit after tax (NPAT) had fallen 12.5% on the previous financial year to $165 million.

Earnings per share also dropped 12.6% to 190.6 cents per share.

However, global sales lifted 3.6% on the previous year to $3.92 billion. Domino’s also opened 294 new stores, the most in its history, and acquired a further 156.

Domino’s is planning to pay the final FY22 dividend on 15 September this year. Domino’s shares will trade ex-dividend  on 30 August. Investors who buy Domino’s shares on or after the ex-dividend date, will not receive the upcoming dividend. The record date for the dividend is 31 August.

Domino’s share price snapshot

The Domino’s share price has slid nearly 50% in the past year, while it has descended more than 39% in the year to date.

For perspective, the ASX 200 has shed nearly 7% in the past year.

Domino’s has a market capitalisation of about $6.2 billion based on the current share price.

The post Everything you need to know about the latest Domino’s dividend appeared first on The Motley Fool Australia.

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More reading

• Why Domino’s, Iluka, Netwealth, and WiseTech shares are storming higher
• Domino’s share price sizzles 10% higher following FY22 report, Asian expansion
• Domino’s Pizza share price in focus as full-year sales near $4b
• 2 excellent ASX growth shares that analysts say are buys
• Here are 3 top ASX growth shares that experts are tipping as buys

Motley Fool contributor Monica O’Shea 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 Dominos Pizza Enterprises 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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The Altium Limited (ASX:ALU) share price has continued to gain ground in the days after the design software company reported FY22 results that smashed expectations. 

For the 12 months ended 30 June, Altium reported a 23% increase in revenue to US$220.8 million and an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 36.7%.

Altium declared a fully franked final dividend of 26 cents per share, taking total FY22 dividends to 47 cents per share, an increase of 18% compared to FY21.

The Altium final dividend will be paid to eligible shareholders on 27th September 2022. Altium shares go ex-dividend on 5th September 2022. 

Based on the Altium share price of around $37, the stock trades at 88 times earnings and on a fully franked dividend yield of 1.27%.

Over the past 12 months, Altium shares have gained almost 3%, compared to a fall of 7.6% in the ASX 200 Index. 

The post Here’s what you need to know about the Altium Group FY22 dividend appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares having such a cracker of a day?
• Here are the top 10 ASX 200 shares today
• Why Altium, Ansell, Monadelphous, and Pilbara Minerals shares are charging higher
• Wall Street Slumps | Pilbara Minerals stunning profits | Kogan shares look cheap, Altium shares less so…
• Altium share price jumps 18% after ‘cracking result’

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 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 Wagners Holdings Company Ltd (ASX: WGN) share price is in quicksand today, falling 26% on the back of a 24% drop in net profit.

The ASX-listed construction materials supplier released its FY22 results this morning. The Wagners share price opened at $1.07 per share but has fallen 26.29% to its intraday low of 78.5 cents at the time of writing.

What did Wagners report for FY22?

Whilst the Wagners share price is swimming in a bloodbath, let’s check out the key financial results for FY22.

• Revenue increased by 5% to $336.8 million relative to FY21
• Net profit after tax (NPAT) went backwards by 24% to $7.6 million
• Net tangible assets per share increased from 59 cents to 63 cents

Both the construction materials & services (CMS) and composite fibre technology (CFT) segments grew revenue by $5.7 million and $10.4 million respectively.

CMS is the biggest revenue segment, recording $294.2 million in FY22. However, it recorded a slightly lower margin due to the timing of large projects.

CFT products are innovative and environmentally sustainable building materials and recorded revenue of $41.9 million. Cost pressures and start-up costs in the US also put downward pressure on margins in this segment.

The company said shipping and fuel costs increased significantly in the second half of FY22. The rise in costs of raw materials also played a key role in the fall in margins as well.

These were the biggest detractors to Wagners’ bottom line.

This essentially explains why operating cash flow fell from $53.1 million to $3.9 million. Payments to suppliers for raw materials and wages soaked a lot of the revenue.

Wagners also ramped up investment in plant and equipment, deploying $24 million in FY22 compared to $15.5 million in FY21.

What else happened in FY22?

The most notable event in FY22 was when the Wagners share price rocketed 16% amid the company landing a $140 million contract for the Sydney Metro-Western Sydney Airport Project.

This was a 20-month contract supplying 67,000 precast concrete tunnel segments.

The Cross River Rail tunnel project was completed in the 1H of FY22, which partially offset the increased sales.

Management remains focused on the future

The CFT and EFC segments remain the future pillars of growth as management strives to enter new markets and invest in automation.

Further capital will be used to invest in R&D to identify new markets and products.

Wagners expects strong cement volumes throughout FY23 due to the high level of activity in the southeast Queensland construction sector. As a result, management will continue to expand its concrete plant network.

The aforementioned Sydney Metro-Western Sydney Airport project will commence in October 2022. Management remains positive about the precast segment outlook with projects like Inland Rail and the 2032 Olympic Games presenting big opportunities.

Wagners share price snapshot

In the last year, the Wagners share price has more than halved, falling by 57% and has dropped 32% in the last month.

In comparison, the S&P/ASX 200 Index (ASX: XJO) only fell 7% in the last year and managed to rise by 3% in the last month.

The current market capitalisation for Wagners is around $152 million.

Its price-to-earnings (P/E) multiple is around 10 times. On this basis, the Wagners share price might seem cheap but the FY22 results show how exposed the business is to external factors. I think this is important to consider when evaluating the Wagners share price.

The post Wagners share price plummets 26% as FY22 net profit declines appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares having such a cracker of a day?
• HMC Capital share price jumps 9% on explosive results
• WiseTech share price surges 11% on record profits
• Netwealth lifts full-year dividend on record inflows
• Lottery Corporation share price drops despite $373 million profit

Motley Fool contributor Raymond Jang 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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It’s been a day of overall happiness on the ASX boards this Wednesday thus far. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has gained a healthy 0.7% and is back over the 9,000 point threshold. But some ASX 200 tech shares are doing even better than that.

Take the WiseTech Global Ltd (ASX: WTC) share price. It’s currently up a whopping 11.68% at $59.19 a share. As we went through earlier today, these gains seem to be a direct result of the pleasing earnings report for FY2022 that WiseTech dropped this morning.

Not only did the logistic company report a 25% surge in revenues and an 80% rise in net profits, but the company hiked its final dividend to a record high of 6.4 cents per share.

So it’s not hard to see why WiseTech shares are on fire today. But this company isn’t the only one tearing it up.

More ASX 200 tech shares on fire today

Altium Limited (ASX: ALU) shares are also doing well, although not quite as well as WiseTech. The ASX 200 tech share and software-as-a-service (SaaS) company has put on a robust 2.29% so far today to $36.66 a share.

That’s after rising as high as $437.20 this morning (up 3.2%). Altium shares have been booming ever since the company dropped its own earnings report yesterday. The company is now up a pleasing 22.6% since Monday’s close.

As we covered yesterday, Altium had some pleasing numbers of its own to show off. Those included a 23% rise in revenues and a 57% boost in net profits.

Another ASX 200 tech share worth checking out today is Link Administration Holdings Ltd (ASX: LNK). Link shares are also enjoying some time in the sun today, up a healthy 1.87% at the time of writing to $4.36 a share.

On Monday, Link investors were uncertain after the company revealed that it was moving forward with an acquisition offer. Link’s management recommended stakeholders vote for a reduced $4.81 per share offer from Dye & Durham. So lots going on there.

All in all, it has been a very positive day for ASX 200 tech shares. No doubt that’s just what investors needed after the rough few days we’ve seen on the ASX recently.

The post Why are ASX 200 tech shares having such a cracker of a day? appeared first on The Motley Fool Australia.

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More reading

• HMC Capital share price jumps 9% on explosive results
• Why Domino’s, Iluka, Netwealth, and WiseTech shares are storming higher
• WiseTech share price surges 11% on record profits
• Netwealth lifts full-year dividend on record inflows
• Lottery Corporation share price drops despite $373 million profit

Motley Fool contributor Sebastian Bowen 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, Link Administration Holdings Ltd, and WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. 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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One of the biggest pieces of news during this week of earnings season so far has been the results that ASX lithium share Pilbara Minerals Ltd (ASX: PLS) delivered yesterday. 

As we covered at the time, Pilbara delighted investors by reporting a whopping 577% surge in revenues to $1.2 billion for the full FY2022. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose to $814.5 million. That was up from $21.4 million in FY2021. 

But perhaps the biggest eye-catcher was the statutory net profit after tax (NPAT) of $561.8 million for FY2022 that Pilbara reported. That was up dramatically from a $51.4 million loss in FY2021. 

ASX lithium shares used to be infamous for a lack of profits on the bottom line.

But after such a strong showing from what is arguably the flagship ASX lithium share on the market, what could this mean for other ASX lithium shares?

What do Pilbara’s profits mean for ASX lithium shares?

Well, it’s certainly good news. Pilbara reported that it was both demand for lithium and spodumene concentrate that drove its impressive results. That was in addition to the strong pricing Pilbara was able to ask for its products.

As we reported yesterday, the average price per dry metric tonne the company was able to command came in at US$2,605.

That led to Pilbara enjoying a gross margin of $853.5 million. That was a massive increase on FY2021’s gross margin of $46.2 million.

These tailwinds Pilbara enjoyed over FY2022 are sector-wide, and thus, not just confined to Pilbara itself. So it does bode extremely well for other ASX lithium shares like Core Lithium Ltd (ASX: CXO) and Lake Resources N.L. (ASX: LKE).

But there is one caveat. Pilbara is certainly far more advanced with its lithium production than many other ASX lithium shares. For example, Core Lithium released a quarterly update back in late June. This revealed that the company’s flagship Finniss Project in the Northern Territory is “on track for first export of lithium by the end of the calendar year 2022″.

This means that Core Lithium is not really benefitting from the same tailwinds as Pilbara right now. Since its flagship project isn’t exporting lithium yet and all.

Similarly, lithium production at Lake Resources’ flagship Kachi Project was described in a July quarterly update as “targeted to commence in 2024“.

Pilbara’s record profit does bode well for all ASX lithium shares. But it’s not a guarantee that other lithium stocks are imminently profitable, especially when lithium product production hasn’t begun at scale just yet. 

The post Could Pilbara’s inaugural profit signal good times ahead for ASX lithium shares? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why Altium, Ansell, Monadelphous, and Pilbara Minerals shares are charging higher
• Why is the Allkem share price acing it on Tuesday?
• Why is Lake Resources underperforming other ASX 200 lithium shares right now?

Motley Fool contributor Sebastian Bowen 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 HMC Capital Ltd (ASX: HMC) share price is galloping higher today. It appears expectations have been exceeded amid the release of the company’s full-year results for FY22.

In afternoon trading, shares in the alternative asset manager are relishing in excitement. At present, the share price has improved by 9.15%, trading at $5.13. This is an exceptional outperformance of the S&P/ASX 200 Index (ASX: XJO), which is 0.53% ahead on Wednesday.

Let’s take a closer look at the numbers.

HMC Capital share price leaps on beastly year

• Assets under management (AUM) up 321% year on year to $5.8 billion
• Pre-tax funds from operations (FFO) up 143% to $91 million
• Funds management revenue up 490% to $64.1 million
• $4.6 billion of gross transactions in FY22
• Dividends per share (DPS) flat compared to FY21 at 12 cents
• Net assets of $846 million as at 30 June, up from $711 million

What else happened in FY22?

It was a monumental year for HMC Capital and its share price by all accounts. Possibly the most significant event during FY22 entailed the rebranding from Home Consortium to HMC Capital.

This was carried out to better reflect the company’s ambitions of being an asset manager. As a result, the growing HomeCo brand is now a single facet of the company’s owned assets. Alongside it is HealthCo and the HMC Capital Partners funds.

Another major event for HMC Capital during the financial period involved the acquisition of Aventus Group. Strengthening the HomeCo portfolio, the HomeCo Daily Needs REIT (ASX: HDN) grew to encompass 2.5 million square metres of land under the deal. The scheme was officially implemented on 4 March 2022.

Finally, the company launched its first fund dedicated to investing in public and private companies across Australia and New Zealand. Importantly, the focus is on companies with ‘real asset backing’. Known as the HMC Capital Partners Fund I, the fund is targeting returns of greater than 15% per annum with a yield of 2% to 4%.

What did management say?

Commenting on the solid result, HMC managing director and CEO David Di Pilla stated:

As a manager we also demonstrated strong discipline and alignment through our proactive response to the rising interest rate environment and market volatility this year. We strengthened the capital position of our funds through opportunistic asset sales which took advantage of the disconnect between property and global capital markets.

Adding to this, Di Pilla highlighted the success of the partners’ fund thus far. As an example, an investment recently made in Sigma Healthcare Ltd (ASX: SIG) has appreciated by 22%.

What’s next?

Due to the unpredictability of transactional income, management was reserved with its forward guidance. However, the team did suggest that the 31 cents per share pre-tax FFO was repeatable. On top of that, DPS guidance was provided at 12 cents per share for FY23.

HMC Capital share price snapshot

There is a stark contrast between the HMC Capital share price and the figures posted today. Unlike the explosive increases in many operational metrics for FY22, the company’s share price has been trending lower.

In 2022, shares in HMC Capital have fallen by nearly 36%. This means the company now holds a market capitalisation of $1.53 billion.

The post HMC Capital share price jumps 9% on explosive results appeared first on The Motley Fool Australia.

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More reading

• WiseTech share price surges 11% on record profits
• Netwealth lifts full-year dividend on record inflows
• Lottery Corporation share price drops despite $373 million profit
• WiseTech Global hikes full-year dividend by 71% as profits surge higher
• Netwealth share price rises 9% on strong revenue growth in FY22 results

Motley Fool contributor Mitchell Lawler 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 Ansell Limited (ASX: ANN) share price has clawed back some of the more than 5% losses posted earlier today.

After closing 8.6% higher yesterday, the Ansell share price is currently down 0.5% in early afternoon trading.

Yesterday, ASX investors were clearly pleased with the company’s full-year financial results.

Today, media reports have emerged that the health and safety products company has been accused in a United States court of “knowingly profiting” from slave labour.

First, a quick recap of the FY22 results.

Ansell share price leapt higher despite profit fall

Ansell’s full-year revenue of US$1.95 billion was down 3.7% from the prior year. Operating profits took an even bigger slide, down 35.7% to US$158.7 million.

The company said the declines were primarily driven by less demand from COVID-19 related safety products.

Earnings per share (EPS) for FY22 of US$1.25 per share were within guidance, with Ansell forecasting EPS in the range of US$1.15 to US$1.35 for FY23.

The Ansell share price gained, as the results exceeded market expectations, with analysts pointing to potential revenue growth in FY23.

Which brings us to…

Allegations of slave labour at Malaysian factory

The Ansell share price looks to be coming under pressure today following media reports workers at one of its third-party suppliers endured slave labour conditions in a factory owned by Malaysian-based Brightway.

As ABC News reported, the case was just lodged in a United States court by 13 people who worked in the factory.

The workers allege that Ansell and US surgical and medical instruments manufacturer Kimberly-Clark “knowingly profited” off their exploitation, as the companies had contracted the factory to make latex gloves.

Allegations include excessive recruitment fees, passport confiscation, abuse, excessive work, and abysmal living and working conditions.

ABC reported that Ansell had not responded to questions about whether it was still using Brightway as a supplier. Brightway products have already been banned in the US over prior labour violations.

Ansell stated it did engage in business with Brightway.

According to a company spokesperson:

Brightway is an independent third-party supplier who has manufactured and provided finished goods to Ansell and other purchasers.

Brightway products have never represented more than a very small percentage of total Ansell purchases from third parties, and it has been one of many direct suppliers to Ansell.

Ansell share price snapshot

Despite yesterday’s bounce, the Ansell share price is down 17% in 2022. That compares to a year-to-date loss of around 8% posted by the S&P/ASX 200 Index (ASX: XJO).

The post Why is the Ansell share price under pressure on Wednesday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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 Ansell 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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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.

About three months ago, Apple (NASDAQ: AAPL) made a small but notable change to its corporate structure. Its VP of advertising, Todd Teresi, started reporting directly to Eddy Cue, who oversees all of Apple’s Services business.

That’s apparently just the start of a big push for the advertising business. Since then, Apple’s made more moves to grow the business, and Teresi said his goal is to grow the business to more than $10 billion in annual revenue.

Two recent changes

Apple currently advertises in the App Store, News, and Stocks apps. But the success of its big-tech companions in advertising suggests it can build a much bigger ad business.

Apple’s advertising business is relatively small for a company with an installed base of over 1.8 billion devices. The company currently generates about $4 billion in annual revenue, which pales in comparison to advertising giants like Meta Platforms, Alphabet, or even Amazon. The smallest of that group, Amazon, has an advertising business nearly an order of magnitude larger than Apple.

That will start with Apple’s plans to expand advertising inventory within the App Store. Apple currently shows display ads when someone clicks the Search tab on the App Store, and it has promoted listings in the search results.

Soon, it’ll show display ads on the Today tab, which provides personalized suggestions for new apps to download. It’ll also start showing display ads within third-party app pages, which means apps will be able to advertise their product on their competitor’s product page.

The second big change in the app business is a new job listing spotted by Digiday. The company is looking to build a demand-side platform, also known as a DSP. A DSP would allow marketers to automate ad purchases across Apple’s inventory, which can lead to greater ad spending. It could also attract advertisers with smaller budgets, increasing competition for each ad spot, leading to higher average ad prices. Owning its own advertising technology can also lead to higher operating margins for the ad business.

Where does Apple go from here?

Apple has a lot of opportunities to insert more advertising into the apps and services iPhone users interact with most often.

It’s reportedly already explored the potential for advertisements within Maps. That could include sponsored search listings as well as highlighting locations along a route or an area of focus.

Other potential areas for advertising, as Bloomberg‘s Mark Gurman points out, include Podcasts and Books. Both have search and discovery features, which could lend themselves well to straightforward display and keyword advertisements.

Expanding the ad business could also lead to things like a podcast advertising network or video ads on Apple TV+. In fact, Apple’s already responsible for selling a small amount of commercials during its Friday night baseball broadcasts on Apple TV+. Apple could expand that to more ad-supported video content in the service in the future.

Another interesting long-term opportunity is building an internet search engine a la Google. While Apple has a lucrative contract with Google today, the search giant could face regulatory pressure in the future, ending such deals.

Teresi’s goal of reaching $10 billion in ad revenue shouldn’t be too difficult. And with the high margins of digital advertising, it could play a significant role in growing Apple’s bottom line over the next few years.

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

The post Apple sees this business reaching $10 billion soon appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Levy has positions in Alphabet (C shares), Amazon, Apple, and Meta Platforms, Inc.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Meta Platforms, Inc. 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 Alphabet (A shares), Alphabet (C shares), Apple, and Meta Platforms, Inc. 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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