Tag: Motley Fool

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.

Twitter (NYSE: TWTR) and Meta Platforms (NASDAQ: FB) became two of the most talked-about social media companies in recent months.

Twitter’s drama started in early April after Elon Musk took a 9.2% stake in the company. Shortly afterwards, Musk launched a hostile bid to acquire all of Twitter at $54.20 a share in a $44 billion deal. Twitter accepted the deal after initially adopting a “poison pill” defense against Musk’s offer.

But over the past month, Musk tried to back out of the deal by accusing Twitter of failing to provide adequate information about its spam and bot accounts. As of this writing, the deal is still in limbo, and Twitter’s stock price remains about 26% below Musk’s “best and final” offer.

Meta’s downfall started in February after it provided dismal guidance for the first quarter of 2022. Its actual first-quarter report in April was lackluster, and the company continued to blame its recent slowdown on Apple‘s (NASDAQ: AAPL) iOS update and competition from ByteDance‘s TikTok.

Meta also remained committed to burning billions of dollars each year on its messy metaverse efforts, and the recent resignation of chief operating officer Sheryl Sandberg stunned investors. Snap‘s sudden reduction of its second-quarter guidance in late May, which it attributed to a deteriorating macro environment for digital ads, raised even more red flags.

That’s why Twitter and Meta have both been terrible investments over the past 12 months. Twitter’s stock has tumbled more than 30% during that period, while Meta’s stock has plummeted over 40%. But could either of these stocks bounce back over the long term?

Twitter might grow faster than Meta this year

Twitter’s revenue rose 37% to $5.08 billion in 2021. Its total number of monetizable daily active users (mDAUs) increased 13% to 217 million.

In the first quarter of 2022, its revenue grew 16% year over year to $1.2 billion. Excluding its sale of MoPub from both periods, its revenue increased 22%. Its mDAUs grew 16% to 229.0 million.

Meta’s revenue rose 37% to $117.9 million in 2021. The total number of daily active people (DAP) across its entire family of apps (Facebook, Messenger, Instagram, and WhatsApp) increased 8% to 2.82 billion.

But in the first quarter of 2022, Meta’s revenue only grew 7% year over year to $27.9 billion as the aforementioned headwinds throttled its growth. However, its family DAP still rose 6% to 2.87 billion.

Analysts expect Twitter’s revenue to rise 16% to $5.88 billion this year, but they only expect Meta’s revenue to increase 7% to $126.6 billion. We should take those estimates with a grain of salt, but that gap likely reflects Twitter’s lower exposure to Apple’s iOS changes (since it also relies heavily on first-party and contextual data for ads) and direct competition from TikTok’s videos.

Twitter might generate stronger near-term profit growth

Twitter posted a net loss of $221 million in 2021, but that red ink was mainly caused by a one-time litigation charge of $766 million. On an adjusted basis, which excludes that charge and other one-time expenses, it generated a net profit of $165 million, or $0.20 per share.

Analysts expect Twitter’s adjusted earnings per share (EPS) to surge 730% to $1.66 this year as it laps those litigation expenses and realizes the gains from its $1.05 billion sale of MoPub to AppLovin. In 2023, they expect Twitter’s revenue to rise 22% to $7.15 billion but for its adjusted EPS to dip 22% against those tough year-over-year comparisons.

Meta’s net income increased 35% to $39.4 billion, or $13.77 per share, in 2021. However, analysts expect its EPS to dip 14% this year as it ramps up its spending on its short video platforms (Facebook Watch and Instagram Reels) and continues to expand its Reality Labs business.

But in 2023, analysts expect Meta’s revenue and earnings to grow 17% and 18%, respectively, if those investments pay off. Therefore, if you have faith in CEO Mark Zuckerberg’s turnaround plans, then 2022 might merely be a short-term speed bump for the company. 

The valuations and verdict

Twitter is trading at a steep discount to Musk’s offer, but it still can’t be considered a bargain at 41 times forward earnings. Its $6.3 billion in cash, cash equivalents, and marketable securities could also limit its ability to expand through investments and acquisitions.

Meanwhile, Meta has become the cheapest FAANG stock at just 16 times forward earnings, which suggests investors don’t have much faith in its ability to address Apple’s platform changes, counter TikTok’s growth, or rein its metaverse spending. However, Meta was still sitting on $43.9 billion in cash and marketable securities last quarter, so it can easily afford to buy additional companies or switch gears to address those challenges.

Therefore, Twitter might initially seem like the better buy, but I believe Meta’s larger audience, better diversified portfolio of apps and services, stronger balance sheet, and lower valuation all make it a more compelling long-term investment. As for Twitter, its willingness to sell itself to Musk — who is now trying to hastily back out of the deal — seems like a bright red flag. 

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

The post Better buy: Twitter vs. Meta Platforms appeared first on The Motley Fool Australia.

More reading

• Twitter stock: The 1 huge challenge Elon Musk faces
• 2 top Nasdaq stocks the world’s best investors were buying last quarter
• Why Meta Platforms stock just rose while Amazon sank
• Will Microsoft and Apple shares finally give way in the stock market’s downturn?
• Why Meta Platforms stock dipped on Monday

Leo Sun has positions in Apple and Meta Platforms, Inc. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Meta Platforms, Inc., and Twitter. 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 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.

from The Motley Fool Australia https://ift.tt/7yTZo9n

I think investing in ASX shares can be a really good way of building wealth over the long term.

There are plenty of different asset classes that investors can choose from. But I believe ASX shares are the leading choice for a few different reasons.

While there will be volatility sometimes, that doesn’t put me off ASX shares. I love them for the following reasons.

Returns

The ultimate goal of investing is to produce investment returns. I think ASX shares are a good way to deliver useful compounding returns.

According to Vanguard, Australian shares have delivered an average return per annum of almost 10% between January 1970 and April 2022.

While past performance is not a reliable indicator of future performance, I think ASX shares can provide decent returns going forward as they continue to make profit and hopefully keep growing that profit over time.

A lot of investors like to value businesses based on the profit of cash flow generated. If the earnings grow, then the share price can theoretically grow.

However, shares can be quite volatile in any given month or year. But volatility is one of the main prices of admission to the ASX share market.

One of the sayings by the great Warren Buffett is that the share market is a “device for transferring wealth from the impatient to the patient“. We can take advantage of this.

Dividends

Dividends form part of the overall return of ASX shares. I think dividends are underrated.

Businesses can decide to pay out some of the profit made each year, allowing investors to receive real cash returns without having to sell their shares.

Investors can choose to spend those dividends or reinvest them into more shares, accelerating wealth growth.

Some businesses pay dividend yields that are much better than what banks are (currently) offering in savings accounts. Examples of ASX dividend shares include Brickworks Limited (ASX: BKW), Baby Bunting Group Ltd (ASX: BBN), Collins Foods Ltd (ASX: CKF) and Wesfarmers Ltd (ASX: WES).

Cheap to invest

Brokerage is cheap these days, allowing investors to get involved for very little upfront cost.

I’m not going to point investors to a particular share broker, but there are plenty of operators that let people invest under $1,000 for around $10 or less per trade.

Other assets can come with much higher transaction costs. For example, buying a property can come with many thousands of dollars of stamp duty, depending on the price of the property and the state that property is in.

Easy administration and takes little of my own time

I think it’s really easy to do the administration of shares.

Business management or funds management administration does most of the work of looking after a business or investment. The CEO of Wesfarmers isn’t going to ring me asking what to do or approve something. Once I’ve bought those shares, it takes little of my own time to keep on top of them.

There’s no dealing with tenants or property managers.

If people haven’t sold shares during the year then reporting dividends and distributions to the ATO is pretty easy at tax time. Dividend statements are given for each payment, and MyGov/pre-fill reports usually automatically have the investment income already reported for taxpayers. Tax time can be pretty simple with ASX shares.

Foolish takeaway

I love investing in ASX shares, it makes it easy to build wealth without using a lot of time managing investments. Getting paid dividends is awesome as well. I’m always on the lookout for ASX shares that could make good additions to my portfolio.

The post Why I love investing in ASX shares appeared first on The Motley Fool Australia.

More reading

• Why is the Crown share price beating the ASX 200 today?
• How is the BHP share price performing so far in June?
• How has the Xero share price performed since reporting FY22 results?
• Rio Tinto share price lifts amid ‘important’ renewable energy step
• 2 ASX growth shares I’d buy right away with $2,000

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 positions in and has recommended Brickworks and Collins Foods Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Wesfarmers Limited. The Motley Fool Australia has recommended Baby Bunting and Collins Foods Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/a6Z8ecy

The market may be tumbling on Thursday but hasn’t stopped the Crown Resorts Ltd (ASX: CWN) share price from pushing higher.

At the time of writing, the casino and resorts operator’s shares are up a decent 2% to a 52 week high of $13.00.

This compares favourably to a 1.1% decline by the ASX 200 index.

Why is the Crown share price beating the market?

Investors have been bidding the Crown share price higher today following an update on its proposed takeover by private equity firm Blackstone.

Crown is in the process of being acquired by Blackstone via a blockbuster $8.9 billion scheme of arrangement.

According to the release, this morning the Victorian Gambling and Casino Control Commission (VGCCC) and New South Wales Independent Gaming and Liquor Authority (ILGA) have given their approval to Blackstone’s acquisition of Crown.

This is a big boost for Blackstone’s $13.10 cash per share proposal, as it means there’s only limited approvals now required for the deal to complete successfully.

The release notes:

The Scheme remains subject to the receipt of gaming regulatory approval in Western Australia, the approval of the Federal Court of Australia at the final Court hearing in relation to the Scheme, and other customary conditions precedent.

However, as the gaming regulatory approval in Western Australia remains outstanding, the date of the final Federal Court hearing has not yet been fixed. In light of this, Crown will update the market once approval is granted and a court date can be fixed.

Today’s gain means the Crown share price is now up over 13% since the start of the year. This means a 20% outperformance compared to the ASX 200 index, which is down 7% year to date.

The post Why is the Crown share price beating the ASX 200 today? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here’s why the Crown share price is climbing higher 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 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.

from The Motley Fool Australia https://ift.tt/ib4BcM6

The BHP Group Ltd (ASX: BHP) share price has dipped slightly in early trade today, slipping 0.13% at the time of writing.

In comparison, the S&P/ASX 200 Index (ASX: XJO) is also down today, edging 0.27% lower.

Let’s zoom out, though, to see how the BHP share price is performing so far in June.

What’s been happening lately?

BHP has had it’s fair share of ups and downs this year-to-date but the mining giant’s shares are trading higher so far in June, up more than 4% since the open on 1 June.

This climb is reflected in the overall upbeat sentiment across the S&P/ASX 200 Resources Index (ASX: XJR) sector, up 4.5% over the same period.

While BHP shares are continuing their stronger form this month, management marked an exciting milestone last week.

In a news update, the company advised its Western Australia Iron Ore (WAIO) operations had achieved an autonomous drilling milestone.

BHP WAIO division has had its drills operating autonomously for more than 479,607 hours. This equates to drilling more than 25 million metres, which is the distance between Perth and Newman around 21 times. Newman is located 1186km north of Perth in the Pilbara region of WA.

About BHP’s autonomous drilling

The company first started its remotely operated drilling program at the Yandi iron ore mine in Western Australia in late 2016.

Since then, BHP has expanded autonomous drilling to a total of 26 rigs across its five Pilbara mine sites. Other locations include Mining Area C, Newman’s Eastern Ridge mine, Jimblebar, Newman’s Whaleback mine, and South Flank.

All rigs across each of the mine sites are controlled remotely from the Integrated Remote Operations Centre (IROC) in Perth.

BHP’s WAIO now holds the title as one of the biggest autonomous drill fleets in the world.

WAIO Asset President, Brandon Craig commented on the feat:

This is an exciting milestone in WAIO’s autonomous journey and one we should all be proud of.

The autonomous drilling program sought to eliminate the risk of safety incidents and serious injuries to our people and, by removing them from the drilling frontline, we’ve also seen an increase in overall drill productivity.

BHP share price summary

Year-to-date, BHP shares are up around 30%. A boom in commodity prices alongside the Russian war in Ukraine are likely to have helped support BHP’s margins.

In contrast, the S&P/ASX 200 Index (ASX: XJO) is down almost 2% over the month after a strong beginning in 2022.

Based on valuation grounds, BHP has a market capitalisation of around $234.39 billion and a price-to-earnings (P/E) ratio of 10.78.

The post How is the BHP share price performing so far in June? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are 2 ASX 50 shares analysts rate as buys
• Rio Tinto share price gains lag BHP despite green steel deal
• Why is the BHP share price having such a stellar day?
• Own BHP shares? Here’s how the miner plans to offset lower iron ore prices

Motley Fool contributor Aaron Teboneras 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.

from The Motley Fool Australia https://ift.tt/By2IerP

The Xero Limited (ASX: XRO) share price is slipping in early trade today, down 0.87%.

Xero shares closed yesterday at $81.85 and are currently trading for $81.14.

A top performer for many years, the Xero share price hit a record high of $155.75 on 1 November last year. Since then, it’s been falling hard, with shares hitting one-year lows on 12 May following the release of the company’s results for the full 2022 financial year (FY22).

It’s been four weeks now since the S&P/ASX 200 Index (ASX: XJO) business and accounting software provider reported those results.

So, how has it been tracking since then?

What’s been impacting the ASX 200 tech share?

The Xero share price had been steadily declining for just over six months when the company reported its FY22 results.

Highlights of those results included a 29% year-on-year increase in operating revenue to NZ$1.1 billion. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at NZ$212.7 million, an increase of 11% from FY21. Yet the company still booked a net loss after tax of NZ$9.1 million.

While revenue and earnings growth were strong, they fell shy of expectations, and the Xero share price ended the day down 11.6% at $76.90.

Since that low, investors have been doing more buying than selling, seeing Xero shares gain 19.7% by 30 May when they closed at $92.02.

But Xero hasn’t proven immune to the forces that have been pulling down most tech shares. Namely hot-running inflation and the accompanying rising interest rates. Those concerns saw the tech-heavy Nasdaq Composite (NASDAQ: .IXIC) slip again overnight, taking the year-to-date losses for the index to 24%.

With shares following the Nasdaq’s lead and slipping today, Xero is now up 5.5% from the close on the day it reported its results.

Xero share price snapshot

The Xero share price is down 37% in the last 12 months, compared to a loss of 3% posted by the ASX 200.

Long-term shareholders, however, will have little to complain about.

If you’d bought Xero shares five years ago, you’d still be sitting on gains of 240%, or 10 times the 24% gains posted by the ASX 200 over that same period.

The post How has the Xero share price performed since reporting FY22 results? appeared first on The Motley Fool Australia.

More reading

• Here’s why I think these ASX tech shares are buys in June
• How are ASX 200 tech shares performing following the RBA rate hike?
• 2 beaten down ASX tech shares that analysts rate as buys
• Why Codan, Incitec Pivot, Xero, and Zip shares are dropping
• Down 13% in a month, fundie says Xero share price is ‘very reasonable’

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/nZrQYeP

The Rio Tinto Limited (ASX: RIO) share price is lifting on Thursday. Meanwhile, the company has taken a major step towards powering its Queensland assets with renewable energy.

The S&P/ASX 200 Index (ASX: XJO) resources giant and Queensland’s largest energy user has put the call out for entities to build large-scale wind and solar projects in the state.

At the time of writing, the Rio Tinto share price is $119.63, 0.6% higher than its previous close.

For context, the ASX 200 is also down, having slipped 0.87% this morning. The company’s home sector – the S&P/ASX 200 Materials Index (ASX: XMJ) – is also 0.13% lower right now.

Let’s take a closer look at the latest news from the metals and mining monolith.

Rio Tinto’s ‘important step’ towards climate targets

The Rio Tinto share price is in the green amid news that the company’s moving to power its Gladstone assets with renewable energy.

Doing so should help it meet its climate change ambitions and encourage renewable development and industry in the region.

The company has opened a formal market request for proposals to find an entity to develop multiple renewable projects.

The projects – in parallel with firming solutions – will help supply power to Rio Tinto’s assets in the Gladstone region through the Queensland grid by 2030.

Those assets include the Boyne smelter, the Yarwun alumina refinery, and the Queensland Alumina refinery.

They need 1140 megawatts of reliable power to run, equating to at least 4000 megawatts of quality wind or solar power with firming.

Rio Tinto Aluminium CEO Ivan Vella commented on today’s news, saying:

[W]e have an important role to play in driving the development of competitive renewable energy sources for our Gladstone assets and supporting the state’s renewable energy targets.

It is early in the process, but this is an important step towards meeting both our group climate change target of halving our emissions by the end of the decade and our commitment to net zero emissions by 2050.

Rio Tinto share price snapshot

The Rio Tinto share price has been performing well in 2022 so far.

It has gained 19% since the start of the year. Though, it’s 5% lower than it was this time last year.

The post Rio Tinto share price lifts amid ‘important’ renewable energy step appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Rio Tinto share price gains lag BHP despite green steel deal
• Own Rio Tinto shares? Here’s why the miner is being sued by this Russian aluminium producer
• What are brokers predicting for the Rio Tinto share price in June?
• What happened to the Rio Tinto share price in May?

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.

from The Motley Fool Australia https://ift.tt/IiAVwT2

The ASX share market is going through a lot of volatility at the moment. ASX growth shares could be opportunities during this period.

Rising interest rates make it a tricky investing environment. However, with the prices of many potential investments now substantially lower, I think they’re long-term opportunities.

Businesses continue to operate, even if the share price is up 5% or down 10% in one week. They’re still trying to grow and succeed. I think the lower prices mean it’s a good time to pounce on ideas. Here are two I’d happily buy during today’s trading with $2,000.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is a leading e-commerce platform business for beauty products. It now sells around 11,700 products from more than 270 brands.

I think the Adore Beauty share price looks very good value after its 70% decline this year. It’s also down almost 80% since November.

While the valuation has suffered, the company continues to grow in operational size, which I think is a positive sign for the future. In the three months to 31 March 2022, revenue rose by 9% year on year to $42.7 million, and active customers increased by 7% to 880,000.

I believe the company is doing a good job at retaining many of the customers that it attracted during the COVID-hit years of 2020 and 2021. The number of returning customers increased by 47% year on year – this was driven by strategic initiatives to improve retention.

Those initiatives include things such as growing its own marketing channels like podcasts and the company’s YouTube channel. The business also notes that successful partnerships with Temple & Webster Group Ltd (ASX: TPW) and 7-Eleven have also supported its strategic focus on increasing brand awareness.

I think increasing operating leverage will help increase the ASX growth share’s profitability over the long term and also help revitalise investor sentiment about the business over time.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This is one of my favourite exchange-traded funds (ETFs) on the ASX.

The ETF has not fallen as much as other investments this year — it’s only down by 9%. Even so, I think it represents a better buying opportunity after its decline.

As VanEck says, this investment is about giving investors “exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team”.

The idea of sustainable competitive advantages is that these companies can continue generating outsized profitability for at least a decade and, more likely than not, for two decades. Competitive advantages can come in different forms such as intellectual property or brand power.

But, the competitively advantaged companies are just a starting point, a watchlist. Businesses are only chosen for the portfolio if they are “trading at attractive prices relative to Morningstar’s estimate of fair value”. In other words, they need to be cheaper than what Morningstar analysts think the businesses are actually worth.

This combination of attributes makes the MOAT ETF an attractive ASX growth share, in my opinion.

On 7 June 2022, these were the biggest five positions: Merck & Co, Philip Morris, Kellogg, Campbell Soup, and Constellation Brands. It’s a diverse portfolio of around 50 names.

Foolish takeaway

I think both of these potential investments have a good long-term future. The lower prices represent attractive entry points. I believe Adore Beauty looks particularly good value considering it is still growing revenue, yet its share price is down heavily.

The post 2 ASX growth shares I’d buy right away with $2,000 appeared first on The Motley Fool Australia.

More reading

• 3 high quality ETFs for ASX investors to buy this month
• Why is the Adore Beauty share price sliding 6% on Monday?
• I’d invest $5,000 into these excellent ASX shares for the long term
• Why has the Adore Beauty share price tumbled 20% in a month?
• 3 top ETFs to today in June

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 positions in and has recommended Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited, Temple & Webster Group Ltd, and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/vhMIyTq

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.

It’s official: Amazon (NASDAQ: AMZN) just executed its first stock split since 1999. 

On Monday, the e-commerce giant gave investors 20 shares for each one they previously held, and consequently, the individual share price plunged. After years of the stock trading in the $1,000 range, it looks odd to see Amazon shares going for just around $120. But while the price of an individual Amazon share is much lower than it was last week, investors shouldn’t be fooled. The stock isn’t any cheaper than it was, and the value proposition is the same as it was last week before the split was announced.

Though the stock split itself doesn’t really matter, there are a number of great reasons to buy Amazon stock now. Let’s take a look at a few.

1. The stock is cheap

Amazon stock isn’t cheap because of the stock split. It’s cheap because it’s trading down a third from its peak last fall, and its earnings potential is as strong as ever.

That said, the company’s generally accepted accounting principles (GAAP) earnings were marred last quarter by a plunge in the value of Rivian, the electric vehicle maker that Amazon has invested in. That was purely a paper loss, based on a mark-to-market method of accounting, which led the company to post a loss in the first quarter. Based on 2021 earnings per share, however, Amazon is trading at a price-to-earnings ratio of just 37.8, about the cheapest it’s ever been based on that metric.

In May, Amazon actually fell below where it was trading in February 2020 before the pandemic. In other words, the market seems to think that all the gains the company made in the last two years aren’t even worth anything. That’s a mistake. 

2. The e-commerce business will recover

The first quarter was an ugly one for e-commerce. In Amazon’s North American segment, revenue grew just 8%, and the company posted a $1.6 billion operating loss compared to an operating profit of $3.5 billion in the quarter a year ago. That business segment isn’t just e-commerce. It includes the high-margin advertising business, meaning that North American e-commerce losses were likely even worse than $1.6 billion.  

The international segment was just as discouraging. Revenue actually fell 6%, or was flat in currency-neutral terms, leading to an operating loss of $1.3 billion, which compares to a segment operating profit of $1.3 billion in the quarter a year ago.

Amazon is facing a number of e-commerce headwinds. Rising fuel prices have contributed to higher transportation costs, which explains in part why shipping costs rose 14% even as units shipped were flat. The company also overexpanded capacity during the pandemic and is now subleasing excess space, but it should eventually grow into that capacity.

The e-commerce sector, in general, was also facing difficult comparisons in the first quarter as Q1 2021 was the last full period before COVID-19 vaccines were available to the public. This was also a time when Americans also got stimulus checks. So e-commerce performance should improve over the year, even though Amazon may continue to lose money this year due to overcapacity.

3. AWS is still a juggernaut

Amazon’s biggest profit contributor is also its most reliable, and it shows no signs of slowing down.

Amazon Web Services (AWS), its cloud infrastructure unit, posted 37% revenue growth in the first quarter to $18.4 billion and currency-neutral operating income growth of 53% to $6.5 billion. That gives AWS a 35% operating margin. Despite competition from Microsoft and Alphabet, Amazon is still the top dog in cloud infrastructure, and it looks set to remain that way based on its growth rate and profitability. 

AWS continues to expand into new products and services such as Amplify Studio and is attracting customers like Boeing, Telefonica, and the owner of the Toronto Maple Leafs hockey team. AWS architect Andy Jassy replaced Jeff Bezos as CEO, showing the importance of the cloud infrastructure business, and some see the addressable market for the cloud infrastructure systems reaching multi-trillion-dollar levels.

On the earnings call, management said that the AWS backlog was up 68% to $88.9 billion, a clear sign of strong upcoming growth. CFO Brian Olsavsky expressed confidence in the business, saying, “For full year 2022, we do expect infrastructure spend to grow year over year, in large part to support the rapid growth and innovation we’re seeing within AWS.” Some investors have even argued that AWS alone can justify Amazon’s valuation.

2022 is still likely to be a tough year for Amazon, and second-quarter guidance was not encouraging, as the company called for 3% to 7% revenue growth, a bottom-line result between an operating loss of $1 billion, and an operating profit of $3 billion. 

Still, the company’s myriad competitive advantages aren’t going anywhere, and the business should improve as it grows into excess logistics capacity and the economy eventually stabilizes. 

Stock split or not, now looks like a great time to take advantage of the discount on this top company. 

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

The post Amazon stock split is complete. Time to buy the stock? appeared first on The Motley Fool Australia.

More reading

• Amazon’s stock split has taken effect. Now what?
• 3 reasons Amazon stock could soar after its split
• Amazon shareholders approve 20-for-1 stock split. Here’s what investors should know
• Amazon stock rallied today — here’s why now might be the time to buy
• 3 reasons to buy Amazon and 1 reason to hesitate

Jeremy Bowman has positions in Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. 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.

from The Motley Fool Australia https://ift.tt/5MvED0U

The Syrah Resources Ltd (ASX: SYR) share price is under significant pressure on Thursday morning.

At the time of writing, the graphite producer’s shares are down a disappointing 12% to $1.35.

Why is the Syrah share price sinking today?

The weakness in the Syrah share price on Thursday has been driven by events near Ancuabe in the Cabo Delgado Province of Mozambique.

This is 200 kilometres away from Syrah’s massive Balama Graphite Project, which is also in the Cabo Delgado Province.

According to the release, the company has received reports of an insurgent attack at a mine project site near Ancuabe. This is the second attack this week in the district of Ancuabe.

The release notes that prior to these incidents there had been a significant improvement in the overall security situation in the province. However, the situation now appears to be deteriorating quickly, which could have some investors fearing that the attacks will spread to Balama in time.

What’s happening?

Syrah advised that the incidents occurred between 30 kilometres and 40 kilometres from the N1 road, which is the primary transport route between Balama and both Nacala and Pemba.

In light of this, Syrah and its logistics service provider have taken the precautionary measure of suspending all personnel and logistics movements through the route section until further information is available.

At this stage, Balama’s mining and processing operations have not been impacted.

Management advised that it retains close contact with Government, security authorities and other stakeholders to monitor the situation and assess the safe resumption of transport operations.

All in all, this is another example of why investing in companies operating in areas close to conflict zones or in countries with high levels of corruption, such as AVZ Minerals Limited (ASX: AVZ), carry significant risk and should be treated with caution.

The post Why is the Syrah share price crashing 11% today? appeared first on The Motley Fool Australia.

More reading

• Mineral Monday: What you need to know about vanadium and which ASX shares are cashing in on it
• 2 sold-off ASX shares essential for electric cars

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 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.

from The Motley Fool Australia https://ift.tt/3Fcf2Vu

I think there are some great ASX tech shares that are now good value following the significant volatility that the market has seen in recent times.

While a business isn’t necessarily a buy just because it has fallen, I believe the two technology investments below could now be very promising for the long term at the current share prices.

Xero Limited (ASX: XRO)

Xero is a leading global cloud accounting software company. I believe it is one of the strongest businesses on the ASX and possibly among the best in the world at what it does.

The ASX tech share is heavily pursuing growth. Despite having a gross profit margin of 87.3%, the business only made free cash flow of $2 million in FY22. That’s because it’s spending enormous amounts on marketing, product design, and development. FY22 marketing costs were $405.7 million, while design and development costs amounted to $372 million.

One way that Xero is developing new ways to engage with customers has been the recently announced partnership with FIFA Women’s Football. In terms of market development, Xero is working on product localisation in a number of international markets and future innovation in areas such as platform, ecosystem, and acquisitions.

The company continues to grow subscriber numbers strongly. Total subscribers increased by 19% over FY22.

I think the 44% decline of the Xero share price in 2022 makes it very compelling for the long-term.

REA Group Limited (ASX: REA)

REA Group is another of the highest-quality businesses on the ASX, in my opinion.

But, the owner of realestate.com.au has been savaged like many other ASX tech shares in 2022. The REA Group share price has fallen by almost 40% in 2022.

It is possible that the property market could go through difficulty as interest rates shoot higher as the Reserve Bank of Australia (RBA) tries to get on top of inflation. A subdued property market isn’t a positive for REA Group.

However, I think this much lower valuation reflects a lot of those potential future impacts. To put things in perspective, it has now fallen approximately the same amount that it did during the COVID-19 crash of February and March of 2020.

I believe the business has a compelling future. I’m not expecting that it can capture much more market share. It’s already the market leader according to the site visits that it regularly boasts about to investors.

For me, there are three areas that make me optimistic about this ASX tech share, aside from the lower valuation.

The first thing is that it can keep implementing good price increases for its property advertising services. Sellers will want to be on the best property portal to ensure the best chance of a good sale, particularly in a difficult market for sellers. However, REA Group’s advertising charge is relatively small compared to the overall sale price of a property.

Second, REA Group is looking at diversifying its business into areas like financial services and data. It now has a sizeable mortgage broking segment after the acquisition of Mortgage Choice.

Finally, I think the ASX tech share has a long-term opportunity in international markets such as the US, India, and other Asian countries where REA Group has investments in leading property sites. Those international sites are not generating useful profit yet, but they are setting the foundation for potential growth as they invest. They can also benefit as more of the local populations turn to digitally searching for real estate.

The post Here’s why I think these ASX tech shares are buys in June appeared first on The Motley Fool Australia.

More reading

• Here are 2 ASX 50 shares analysts rate as buys
• How are ASX 200 tech shares performing following the RBA rate hike?
• 2 beaten down ASX tech shares that analysts rate as buys
• Why Codan, Incitec Pivot, Xero, and Zip shares are dropping
• Down 13% in a month, fundie says Xero share price is ‘very reasonable’

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 positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/BLlSfhy