Tag: Motley Fool

July gains

Global stock markets continue to hold on to their huge July gains, albeit without setting the world on fire.

Although central banks are still hiking interest rates, the latest being the Bank of England’s 0.5 percentage point increase overnight (more on this below), US and Australian bond yields continue to fall… a positive for markets.

After having hit 4.2% in mid-June, the Australian 10-year bond now stands at 3.1%, and is a significant reason as to why the S&P/ASX All Technology Index (ASX: XTX) has roared 25% higher in just the past three weeks.

With gains like that, it’s no wonder markets are pausing for breath, especially given the ASX reporting season is just around the corner. 

The lower the interest rate, the cheaper the money. And the cheaper the money, the higher the stocks. 

US leads the market

Whilst ASX results will be important on an individual company basis — sending stocks up or down largely based on their future outlooks — the overall direction of the stock market will be determined by what’s happening in the United States.

As ever, in these unusual days of sky-high inflation, all eyes remain on the US Federal Reserve and its pace of interest rate rises.

Commenting on Bloomberg, Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, said, “there’s an intense tug-of-war happening in the economy and markets.” 

“On one side, you have a narrative that reasonable growth is going to support continued inflation pressure and keep the Fed hiking. The other narrative is that slowing growth is going to ease inflation and allow the Fed to stop hiking.”

I’m playing both sides, as you’ll read further down…

Instability and high inflation in the UK

The United Kingdom looks to be in a mess. 

Never mind temperatures recently reaching 40 degrees celsius for the first time ever (brutal for a country with virtually zero air conditioning)…

And a period of political instability following the resignation of Prime Minister Boris Johnson…

Overnight, the Bank of England increased its inflation forecast to a whopping 13.3% for the fourth quarter, predicting it will still be around double-digit levels in a year’s time.

13.3% inflation!!! Imagine what that could do to the price of an iceberg lettuce.

This came after the central bank raised its base rate by 0.5 percentage points at the same time as predicting the UK economy was on course for a period of stagflation – a recession combined with a soaring cost of living.

The Financial Times said: “Britain faces a protracted recession and the worst squeeze in living standards in more than 60 years.”

Yet, the FTSE 100 took the blow in its stride, finishing flat on the day’s trade. In fact, over the past 12 months, the country’s benchmark index has gained 4.6%. 

Never more true is the saying the stock market is not the economy. Still, there are undoubtedly tough times ahead for the 67 million inhabitants of the United Kingdom.

Have we reached the bottom?

With each passing day of the US earnings season, speculation is growing that stock markets have bottomed. 

Big tech names such as Alphabet, Apple and Microsoft reported earnings at least in line with expectations, something that in these beaten-down markets has been enough to send stock prices higher. 

Having at one stage fallen 29% in 2022, the Apple share price has jumped 27% higher in the past 3 weeks. Not bad for a company with a market cap of $US2.66 trillion.

So was mid-June the market bottom?

I’d put the odds at say 70/30 in favour of yes as it feels like the current batch of interest rate rises in the US and Australia are having the effect of slowing inflation.

The alternative — the stock market falling back below its June 2022 lows — is encapsulated by comments in the latest Totus Alpha Fund performance update:

It takes time for the impacts of high inflation, higher interest rates and lower liquidity to feed through to the economy and asset prices. Central banks have been crystal clear in their warnings about inflation and the only tool they have to control it is asset prices.

At some point central bankers will have to reverse course and stimulate but if it is after a recession then history suggests that the starting point for asset prices will be lower.

Totus are acutely aware of their reputation as “perma bears,” yet are ready to add to their favourite high-quality companies on any further bouts of stock market weakness.

Being a glass-half-full person, I always look at times like these as opportunities. 

If the market keeps rising, your portfolio benefits, and also it indicates better times ahead (albeit some months ahead) for the economy.

If the market does indeed test its June 2022 lows, it gives you an opportunity to snap up some more bargains. I was very active — especially at the smaller end of the market — during a time which I thought was characterised by indiscriminate selling, likely tax-loss related. 

I’ve got cash on the sidelines, ready to go again. Roll on ASX earnings season, where I’ll find out if I backed the right horses. Giddy up, investors.

The post Even if the stock market hasn’t bottomed, here’s how you can still win the game of investing appeared first on The Motley Fool Australia.

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More reading

• 3 ASX gold shares surging ahead on Friday
• ASX gold share Peregrine explodes 60% on ‘spectacular’ new find
• Guess which ASX lithium share is rocketing 18% on a new deal with BMW
• Road to retribution: Can the Telstra share price continue its upwards trajectory under a new CEO?
• Block share price tumbles 6% as quarterly earnings sink

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Bruce Jackson has positions in Alphabet (A shares) and Alphabet (C shares). 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 Microsoft. 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), and Apple. 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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Gold prices continue to surge after finding a bottom last month. The yellow metal now trades at US$1,791 per troy ounce.

A wave of macroeconomic crosscurrents is lifting the gold price this month after traders had sold it down to 52-week lows.

Gold prices climbed more than 1% to hit a fresh one-month peak on Thursday. According to Reuters, this “was underpinned by a retreat in the dollar and U.S. Treasury yields, as investors kept a close tab on U.S.-China tensions”.

With the relief rally in place, these three ASX gold miners have opened the session in the green on Friday.

OceanaGold Corp (ASX: OGC)

Shares of OceanaGold are up more than 8% higher on Friday and now trade at $2.61 apiece on no news.

After a period of heavy downside since April, the company’s shares have bounced from three-month lows as trading volume surges to around three times the four-week average.

On 29 July, the company released its second-quarter financial report, showing a period of sales growth.

The company reported revenue for the six months ended 30 June 2022 increased by 55.4% over the comparative period last year. This was “due mainly to higher sales volumes and higher average gold and copper price,” OceanaGold said.

“Net profit after tax [NPAT] for the six months ended 30 June 2022 was $98.0 million compared to $47.4 million for the same period in 2021,” it added.

This year to date, the OceanaGold share price has clipped a 12% gain.

Bellevue Gold Ltd (ASX: BGL)

Shares in Bellevue Gold have pushed 5.42% higher today and now trade at 87.5 cents apiece. Certainly, the gold price looks to have helped Bellevue shares today.

The company released its second-quarter report in July where it said it had significantly de-risked its Bellevue Gold Project in WA by locking in 90% of pre-production capital under contract.

Moreover, with exploration and capital expenditure in the gold sector heating up, “[e]merging producers like Bellevue could be on the menu for the big producers,” Livewire notes.

Despite the updates, the Bellevue share price has slipped more than 17% into the red over the past 12 months to date.

Ramelius Resources Ltd (ASX: RMS)

Shares of Ramelius are another gold play that has spiked more than 5% in today’s session at the time of writing.

Investors have bid the Ramelius share price 5.5% higher on no news, with the gains looking to be correlated to sector strengths today.

After several months of downturn, the stock has caught a bid since 30 June. This is curious, as sentiment was poor following the release of the company’s production update a week earlier.

The company reported its “gold production for FY22 will fall marginally short of the current guidance range”.

Nevertheless, with the price of gold strengthening, and the broad sector strengthening since June/July, the stage is set for Ramelius to gain on the chart.

The post 3 ASX gold shares surging ahead on Friday appeared first on The Motley Fool Australia.

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More reading

• 5 ASX mining shares with ‘good margins regardless of commodity prices’: fundie
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

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 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 Peregrine Gold Ltd (ASX: PGD) share price has jumped nearly 62% into the green on Friday after coming out of a trading halt from 1 August.

Peregrine advised it had intersected mineral resource after drilling at its Peninsula Prospect, part of the Newman project in WA.

The announcement has caught buyers today and volume has surged to 260 times the 4-week trading average at more than 760,000 shares.

What did Peregrine announce?

The company announced that a significant amount of visible gold has been identified in a drill core after dilling within a quartz-ironstone breccia vein at the Peninsula Prospect.

It identified visible gold at the surface level and then used a hand-held core drill to drill two vertical holes adjacent to and beneath the visible resource.

Peregrine technical dDirector, George Merhi said that it is “very rare” for a first-time field exploration program to strike this kind of mineralisation “undisturbed at the surface”.

In addition to being a very impressive demonstration of the high-grade potential of this system it also highlights just how underexplored the area is.

Peninsula and the other Newman prospects due to be drilled have been uncovered as a result of systematic exploration over a small portion of our overall project area. In 2022 we have expanded this effort and look forward to updating the market on potentially new discoveries in this exciting district.

From here, the company is set to commence reverse circulation (RC) drilling on 15 August. Efforts will be focused on the Peninsula prospect and those adjacent prospects to the site.

In the past 12 months, the Peregrine share price has gained 58% as well as 45% this YTD.

The post ASX gold share Peregrine explodes 60% on ‘spectacular’ new find appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX lithium share is rocketing 18% on a new deal with BMW
• Road to retribution: Can the Telstra share price continue its upwards trajectory under a new CEO?
• Block share price tumbles 6% as quarterly earnings sink
• Worried about how ASX 200 tech shares might perform this earnings season? Here’s what to watch
• Why Goldman is tipping 80% upside for the Elders share price

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 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 biggest ASX lithium shares are all edging higher in late morning trade.

But one small-cap lithium stock is leaving them far behind.

Shares in European Lithium Ltd (ASX: EUR), with a market cap of some $143 million, are soaring 18% at the time of writing, having earlier posted gains of more than 34%.

This comes after the ASX lithium share emerges from yesterday’s trading halt, which it requested “pending an announcement regarding offtake arrangements.”

That announcement was released this morning when European Lithium reported on a deal with Bayerische Motoren Werke (ETR: BMW).

And ASX investors have taken note.

ASX lithium share rockets on agreement with BMW

European Lithium reported it has signed a non-binding memorandum of understanding (MOU) with BMW, securing its first offtake of battery grade lithium hydroxide (LiOH).

The MOU will see European Lithium and BMW cooperate in negotiations for “suitable commercial terms” for BMW to purchase LiOH from the ASX lithium share. BMW will have the first right to purchase 100% of the LiOH produced from the identified resources.

Commenting on the MOU, Tony Sage, European Lithium chair, said, “Securing our first offtake with BMW AG is another key milestone for the company. Partnering with BMW AG is an ideal fit for EUR”.

European Lithium said no assurance is given that the non-binding MOU will progress to a binding contract.

Should the parties agree to a binding contract, BMW will pay US$15 million upfront. European Lithium will repay that through equal set offs against the LiOH it delivers to BMW.

The ASX lithium share said it will use the proceeds from the prepayment to develop its Wolfsberg Project. That includes supporting the commencement of the construction phase.

European Lithium stated:

Securing its first offtake is a key milestone allowing the company to focus on the final steps of development and implementation of the Wolfsberg Project while it looks to the future and builds a portfolio of prospective battery metals projects located in Europe.

How has European Lithium been performing?

Though European Lithium has struggled this year, down 31% in 2022, the ASX lithium share remains up 60% over the past 12 months.

For some context, the All Ordinaries Index (ASX: XAO) is down 7% since this time last year.

The post Guess which ASX lithium share is rocketing 18% on a new deal with BMW appeared first on The Motley Fool Australia.

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More reading

• Road to retribution: Can the Telstra share price continue its upwards trajectory under a new CEO?
• Block share price tumbles 6% as quarterly earnings sink
• Worried about how ASX 200 tech shares might perform this earnings season? Here’s what to watch
• Why Goldman is tipping 80% upside for the Elders share price
• ‘The world is changing’: CEO reveals what will help drive Rio Tinto shares in 2023 and beyond 

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 recommended BMW. The Motley Fool Australia has recommended BMW. 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 risen by around 50% since 30 October 2021.

The telco has been going through a significant strategic shift in a bid to improve things for a while now, with its T22 strategy and the recently-announced T25 strategy.

At the end of March 2022, current CEO Andrew Penn announced that he was going to retire after serving more than seven years in the role.

Telstra’s current chief financial officer (CFO) Vicki Brady will officially take over as CEO on 1 September 2022.

In an interview with The Australian, Penn said:

The fact I’ve been able to create my successor and the chief financial officer successor from within the team, it’s a great team that is very cohesive. Strategies come and go but those things are durable and will mean whatever our strategy is in the future we will be able to respond to.

Review of how Penn performed

Telstra Chair John Mullen has commented on the positive impact Penn has had on the business:

Andy has led Telstra during a period of significant change and will be known for his courage in setting a bold ambition through the T22 strategy to deliver a transformed experience for customers, shareholders and employees.

There is no doubt the strategy has delivered beyond expectations and has laid the foundation for Telstra’s recently announced T25 strategy and a renewed focus on growth and innovation.

Delivery of the T22 strategy has seen Telstra return to underlying growth, achieve significant customer experience improvements, reduce costs by over $2.5 billion and reach high performing employee engagement levels with over 17,000 people now working in agile teams across Telstra.

Those were some of the key objectives of the T22 strategy. Telstra also worked on monetising assets. It managed to sell 49% of its towers business for $2.8 billion.

Telstra acquired Digicel Pacific in partnership with the Australian government for US$1.6 billion. It’s a leading telco provider across PNG, Fiji, Nauru, Samoa, Tonga, and Vanuatu. It has around 2.5 million subscribers, generating US$431 million of service revenue, the majority of which is generated in PNG.

It also bought GP clinical and practice management software company MedicalDirector for an enterprise value of $350 million.

The asset sale and acquisitions came within the last 18 months, so it has been a busy period for the business.

What’s the next thing that could impact the Telstra share price?

Aside from the impending result during reporting season, the telco is now working on its T25 strategy.

This involves expanding its 5G network coverage, improving its customer experience, and growing its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) as well as its underlying earnings per share (EPS) It also aims to further reduce costs and look to grow its dividend over time. Indeed, profit growth could be key for helping the Telstra share price rise.

While this strategy was devised under Penn’s leadership, it will be the new CEO that is tasked with seeing it through.

Certainly, 5G could unlock new technologies and services that are yet to be invented.

Telstra share price snapshot

Over the last month, the Telstra share price has risen by almost 4% and over the past five years, it has dropped 3%. However, there have been many ups and downs during that time.

The post Road to retribution: Can the Telstra share price continue its upwards trajectory under a new CEO? appeared first on The Motley Fool Australia.

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More reading

• Expert says Telstra is a blue chip ASX 200 share to buy
• ‘Competition is key’: Why Telstra shares are in the ACCC naughty corner today
• Is the Telstra share price on the way back up?
• Top brokers name 3 ASX shares to buy next week
• Why this ASX 200 giant ‘looks attractive’ right now: expert

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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The Elders Ltd (ASX: ELD) share price has had a rough month on the markets, but the stock’s future appears far brighter.   

That is according to one top broker. Goldman Sachs remains bullish on the Elders share price, holding its ‘conviction buy’ rating steady and tipping an 80% upside on its current levels, as my Fool colleague James reports.

The S&P/ASX 200 Index (ASX: XJO) agribusiness company’s stock is currently swapping hands for $11.71 a piece. That’s 9.7% lower than it was this time last month.

Let’s take a look at what’s got Goldman Sachs bullish on the 183-year-old Australian business.

Goldman Sachs tips Elders share price to reach $21

The Elders share price could soon reach a whopping $21, according to the broker. Goldman Sachs believes the ASX has been too harsh on the stock.

It commented on the recent selloff of Elders’ shares, saying:

We believe the market is applying a higher weight to the potential of a cyclical downturn in seasonal conditions over the long-term structural growth opportunities still in front of the company.

Elders revealed a combination of market and seasonal factors, acquisition, and organic growth saw its activity increase over the first half of financial year 2022.

Indeed, it posted a 38% jump in revenue and an 80% lift in earnings before interest and tax (EBIT) over the six months ended 31 March.

That led the company to upgrade its guidance. It’s forecasting its full-year EBIT to be 30% to 40% above that of financial year 2021.

And it’s not just the company’s potential growth that’s exciting the team at Goldman Sachs.

The broker tipped Elders to up its dividends to 50 cents for financial year 2022 and 53 cents in financial year 2023, as The Motley Fool Australia reported last month.

For comparison, the company paid out 42 cents in dividends in financial year 2021.

The post Why Goldman is tipping 80% upside for the Elders share price appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Broker names 2 ASX dividend shares to buy next week
• These were the worst performing ASX 200 shares in July
• Analysts name 2 ASX dividend shares to buy with 4%+ yields

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 positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Elders 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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Rio Tinto Limited (ASX: RIO) shares are off to a positive start in early trade, up 1.3%.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant closed yesterday at $96.58 and are currently trading for $95.99.

That’s this morning’s price action for you.

Now here’s what CEO Jakob Stausholm says will help drive Rio Tinto shares in the future.

A new kind of partnership

On 21 July Rio Tinto announced it had signed a memorandum of understanding (MOU) with Ford Motor Company (NYSE: F) to supply the automaker with battery and low carbon materials in support of a net-zero future.

Among those materials, Rio will be the primary supplier of aluminium raw materials for Ford’s F-150, the world’s first all-aluminium body pick-up truck. Or ute, if you prefer.

Responding to a question regarding Rio’s MOU with Ford and how things might evolve with agreements with automakers during the mining giant’s earnings call, Stausholm said (lightly edited for readability):

What you see is that EVs is happening now and it’s an irreversible process. In the beginning, people were afraid of investing in the new platform of EV. But now all of the automakers have done it, and they really have to scale that up. And suddenly, they’re all realising that some of the bottlenecks are actually in the materials.

That’s one dimension.

The other thing is they’re making commitments that their products will have less CO2 in them. For both reasons, we [Rio Tinto] become very, very relevant.

Stausholm also noted the low emissions levels related to miners’ aluminium production, which should offer future tailwinds for Rio Tinto shares.

“We also are very relevant [because] we are producing some of the lowest CO2 aluminium in the world,” he said.

“So, it’s a different kind of partnership with customers that we can start forming compared to a history of very much commodity trade from our side. The world is changing in the commercial landscape, and I find it very exciting.”

How have Rio Tinto shares been performing longer-term?

So far in 2022 the mining giant is down 4%, compared to an 8% year to date loss posted by the ASX 200.

Over the past five years Rio Tinto shares have gained 52%.

The post ‘The world is changing’: CEO reveals what will help drive Rio Tinto shares in 2023 and beyond  appeared first on The Motley Fool Australia.

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More reading

• ‘We are in for the long haul’: Rio Tinto CEO defends future spending in the face of recession fears
• Which ASX 200 shares will prove to be dividend heavyweights this earnings season?
• ‘Unlocks hidden value’: Rio Tinto share price slides despite $525 million payday
• Is the iron ore price entering a bear market?
• Why is the Fortescue share price sliding on Tuesday?

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 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 Brainchip Holdings Ltd (ASX: BRN) share price has been on a rollercoaster ride of late.

Shares in the ASX computer chip processor have gained 40% in the last month, but have lost 12% in just the past week.

According to the Australian Financial Review (AFR), a relatively unknown US-based investment firm has played an influential role. 

The investment house LDA Capital reportedly has a financing arrangement with Brainchip. And it seems the company is not the only ASX micro cap it’s supporting.

But more on that later. Let’s focus on Brainchip first up. 

Brainchip and LDA Capital

According to the AFR, Branchip’s financing arrangement with LDA Capital allows it to access between $20 million to $45 million across a one-year period. This arrangement reportedly started in August 2020. 

In return, LDA Capital is paid fees and provided 100 million options, leading it to bank tens of millions of dollars, the AFR reported.

LDA Capital decided to exercise 75 million options in January 2021. Half were exercised at an issue price of 15 cents a share and the other half at 20 cents per share. 

The AFR also noted Brainchip had requested an extension to draw the minimum amount under the facility, enabling it to access a further $35 million.

LDA Capital’s latest ASX coup is Hawson Iron Ltd (ASX: HIO) which, in December 2021, said it had secured $200 million in funding. 

What is Hawson Iron? 

The business holds a 100% interest in the Hawsons Iron Project outside Broken Hill in New South Wales, as well as other magnetite interests in the emerging Braemar Iron Province. 

The project is striving to produce the world’s highest grade iron product to steelmakers who understand the benefits of producing ‘green steel’. That’s according to the company’s latest quarterly report. 

Similar to Brainchip, Hawson Iron is yet to generate a profit and both companies remain highly speculative investments. But this appears to be the type of business that LDA Capital caters for globally.

GetSwift Ltd was another company within LDA Capital’s portfolio.

The former ASX-listed logistics software company, founded by former media executive Bane Hunter and retired AFL player Joel Macdonald, recently filed for bankruptcy, according to media reports.

Tread with caution

Unprofitable companies with unproven business models are often risky. When you add in significant leverage, it often creates a recipe for disaster. 

Whilst GetSwift presents the worst-case scenario, I believe it’s imperative for investors to tread carefully in such murky waters. 

The post This US investment house has made tens of millions from Brainchip. Guess which other ASX share it’s backing. appeared first on The Motley Fool Australia.

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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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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

July was a good month for the stock market in general, with the S&P 500 index jumping over 9%. But some electric vehicle (EV) stocks significantly outpaced that gain. Shares of sector leader Tesla (NASDAQ: TSLA) jumped 32.4% during the month, while the stocks of start-ups Lordstown Motors (NASDAQ: RIDE) and Canoo (NASDAQ: GOEV) soared 41.8% and 87%, respectively, according to data provided by S&P Global Market Intelligence.

So what

Tesla shares have now increased more than 45% since late May. The jump in the month of July came as Tesla reported second-quarter earnings that showed the company was resilient even in the face of several headwinds. Its second-quarter revenue increased 42% year over year, but was lower than the two previous quarterly sales results. Considering supply chain issues that most global automakers are also facing, as well as COVID-19-related production delays and sales impacts from lockdowns in China, the results were received positively. 

Now what

These challenges also come as Tesla works to ramp up production at its two new factories in Texas and Germany. CEO Elon Musk had recently said those plants were burning cash, but Tesla still generated free cash flow of $621 million in the second quarter. That helped put some concerns to rest, and it was also taken as positive news for Tesla competitors. 

Lordstown and Canoo stocks outperformed Tesla in July on more than just sector tailwinds. Both businesses had been in danger of failing, but managed some key moves to continue with plans to operate and grow. 

Lordstown shifted its strategy and formed a strategic partnership with electronics manufacturer Foxconn. Foxconn purchased Lordstown’s manufacturing facility and will build the electric Endurance pickup truck for the EV company. The asset sale provided Lordstown needed capital, and the two companies intend to expand their joint venture for future product collaboration.

Canoo reported a net loss of $125 million in the first quarter, and it was down to just $104.9 million in cash and cash equivalents as of March 31, 2022. But in July it announced two new deals that may have saved the company. On July 12, it announced an agreement with Walmart. The retail giant agreed to purchase 4,500 of Canoo’s electric lifestyle delivery vehicles (LDVs), with an option for a total of 10,000 units to support its e-commerce business. Just two days later, Canoo said the U.S. Army agreed to take a vehicle “for analysis and demonstration.” Investors hope this could presumably result in a business relationship in the future. 

While both Lordstown and Canoo seemed to get good news last month, it should be noted that the outsize stock moves came after the stocks had hit all-time lows heading into July. Both companies’ market capitalizations had fallen below $500 million at that time. The bounce reflected hope that the companies will survive, but investors shouldn’t forget they remain very speculative investments. 

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

The post Why Tesla and other EV stocks rocketed higher in July appeared first on The Motley Fool Australia.

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Howard Smith 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 Tesla. 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.

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

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A top broker believes the Qantas Airways Limited (ASX: QAN) share price could be dinted as disappointing service, reduced capacity, and higher costs take their toll.

Citi asked, “How much will it cost [for Qantas] to improve performance?” The broker refers to large numbers of delays and cancellations experienced by the airline in June.

The Qantas share price closed Thursday’s session trading at $4.56 and is currently swapping hands for $4.62 in early trade. But Citi doesn’t believe that will hold.

Let’s take a closer look at why the broker is bearish on the S&P/ASX 200 Index (ASX: XJO) travel staple.

Broker tips Qantas share price to tumble 6%

Citi has slapped Qantas’ shares with a ‘sell’ rating and a lower price target on concerns the company will be forced to fork out extra cash and drop capacity in a bid to improve its performance.

“Overall, we expect improved on-time performance and cancellation rates from Australia’s premium airline,” the broker said before continuing:

However, we estimate this will likely come at a cost of higher staffing levels and lower capacity.

Subsequently, we forecast lower capacity growth and higher [cost of available seat kilometres] than the market is expecting.

The broker said Qantas upped staff numbers by around 3% and cut capacity by around 10% over the last few months amid higher costs, reports The Australian. It quoted Citi’s Samuel Seow as saying:

We expect this trend to continue and as a result we see higher costs and lower capacity. 

The broker also holds a “cautious” view of Qantas’ upcoming full-year earnings, set to be released on 25 August. It expects the airline’s guidance to be muted after a slow start to the financial year 2023.

Indeed, the company admitted the spread of COVID-19 and flu saw 15% of domestic flights cancelled or delayed for more than an hour during July’s busy school holiday period.

Citi’s new price target for Qantas shares is reportedly $4.28. That represents a potential 6.1% downside for the stock.

Citi also downgraded its financial year 2023 earnings expectations for the company.

It now expects Qantas to post a $514 million underlying profit, a 30% drop on its previous prediction, according to The Australian.

The post ‘Higher costs and lower capacity’: Why this broker tips the Qantas share price to nosedive appeared first on The Motley Fool Australia.

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More reading

• Are Qantas shares worth buying ahead of this month’s earnings result?
• Why is Rex smashing the Qantas share price on Tuesday?
• Qantas share price lifts despite airport mayhem
• When will Qantas shares pay a dividend again?
• What’s happening to the Qantas share price today?

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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