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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.

Everyone can look smart in a bull market. We saw that in 2020 and 2021 — you could pick about any stock and make money. But now, it seems like every stock is falling, and the sun might never shine again. Don’t let the volatility of the market discourage you. 

The stock market has historically moved in cycles, up and down. This is likely yet another cycle of many. However, bear markets can have real implications for young companies, and growth stocks could face the financial stress of a recession.

No investor wants to buy a stock that falls dramatically and never recovers. If your growth stocks check these three boxes, they’re more likely to live to see another bull market. 

1. Revenue growth

Long-term investors should look to invest in companies that can thrive through good and bad times. Revenue growth is the most straightforward way to measure this. Now, that’s not to say revenue growth can’t slow in a recession — companies rarely grow for years without hiccups.

But a company must show that its business model is durable, that it’s not a fluke or temporary fad. Fitness equipment brand Peloton saw its growth explode upward during the height of COVID-19, but it has since imploded.

Data by YCharts.

Whether it’s a lousy business model or mismanagement by leadership (arguably both in Peloton’s case), execution must be consistent, or the business isn’t likely to thrive over time, let alone survive a recession.

2. Positive cash flow

So why do so many growth stocks fall during a bear market? It’s common for young and growing businesses to lose money. Companies can easily raise money when share prices are up in a bull market. They can sell stock at inflated valuations, which prevents investors from seeing their existing shares drop too much in value (dilution).

Suppose a company needs a million dollars and trades at $100 per share. It can raise that money by issuing 10,000 shares of new stock. But say the market crashes, and the stock price falls to $10. Now, the company must issue 100,000 shares to raise the same amount of money. That’s 10 times more shares, so existing shareholders experience greater dilution.

So what’s the solution? A company might be unprofitable for several reasons, and stock-based compensation, a non-cash expense, is one of them. Instead, look for companies generating free cash flow since cash profits go to the balance sheet.

A company burning a lot of cash (negative free cash flow) may need to raise money, and you don’t want that to happen when the share price is in the gutter or forcing the business to take on excessive debt.

3. Healthy balance sheet

Lastly, you want a company with a healthy balance sheet. For growth stocks, this means two things. First, you want to see as little debt as possible. There are times when companies borrow to fund an acquisition, or the business model requires debt like what Opendoor uses to buy housing inventory, but these are the exception and not the rule. 

You also want to see that there’s a healthy cash balance. A company could be so young it’s burning through money, but if it has substantial reserves from a recent IPO, that helps.

For example, cybersecurity company SentinelOne has burned through $105 million over the past year Meanwhile, the stock has fallen from a high of nearly $79 to $24 since its June 2021 IPO.

Data by YCharts.

You can see how it has almost $1.7 billion in cash. That’s enough money to operate the company for another four years based on its current cash burn rate, assuming the business doesn’t grow or get any closer to turning a profit.

You can’t know what the stock will do in the short term, especially during volatile markets. But you can see SentinelOne’s excellent balance sheet and know it’s doubtful the business is going anywhere, which lets you focus on what drives long-term returns like growth and business execution.

Wrapping up

Growth stocks that show resilience, generate cash profits, and have a strong balance sheet have all the building blocks to become great investments. Focusing on the things that matter instead of the things that don’t (like short-term price action) will put you in a position to do well as an investor. 

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

The post Your growth stocks better check these 3 boxes during a bear market appeared first on The Motley Fool Australia.

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Justin Pope has positions in Opendoor Technologies Inc. and SentinelOne, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has has positions in and recommends Opendoor Technologies Inc. and Peloton Interactive. 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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The Brickworks Limited (ASX: BKW) share price looks like a buy in my opinion.

There are a few elements to the Brickworks business. Certainly, its diversification is one of the things I like about the company. Brickworks is one of the largest building products manufacturers and suppliers in Australia, with operations in bricks, masonry, roofing, cement, precast, and so on.

The Brickworks share price has dropped close to 20% over the last two months. That alone makes it more attractive to me. But there’s more to like about the business than simply being cheaper.

These are some of the reasons why I like the business.

US opportunity

Brickworks is a leading brickmaker in the northeast of the US after a few acquisitions, including Glen-Gery.

The US is a large market for Brickworks to tap into. Glen-Gery has 27 company-owned distribution locations.

The company’s management is working on making the business as efficient as possible by closing some locations and upgrading others. For example, it has completed “extensive” upgrades at its Hanley plant in Pennsylvania, which is focused on premium architectural products. The company has upgraded its clay preparation area, the extruder, and the setting line to deliver “much improved manufacturing efficiency, product quality and a broader product range”.

While inflation and supply chain issues are hurting shorter-term profitability, the US division also reported a record order book, which was expected to lead to increased sales activity from April.

Investments division

As well, Brickworks owns a sizeable chunk (26.1%) of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

I think that the Soul Pattinson investment is very useful. It can provide diversification and consistency for Brickworks while its building products earnings can be cyclical. The Soul Pattinson shares form a sizeable part of the asset backing for the Brickworks share price.

Soul Pattinson owns a diversified portfolio across a number of sectors including resources, telecommunications, agriculture, financial services, swimming schools, and so on.

Brickworks is receiving a growing dividend from the investment house, which helps fund its own dividend.

Property division

This could be my favourite factor for liking the business at the current Brickworks share price.

Brickworks owns a 50% share of an industrial property trust in a joint venture with Goodman Group (ASX: GMG).

The ASX share said that industrial real estate valuations continue to increase in response to consumer trends such as online shopping. This spurs demand for large, strategically-located warehouses to run their operations.

The property trust is benefiting from completing a number of projections. In the FY22 first half result, the trust made a development profit of $115 million, primarily driven by completing the Amazon facility at Oakdale West.

As developments are completed, rental income continues to grow. Net trust income for the half was $17 million, up 7% year on year. This is helping fund the growing Brickworks dividend as well.

Brickworks dividend

At the current Brickworks share price, it has a grossed-up dividend yield of 4.5%. In this period of volatility, having dividends is a useful boost in my opinion.

The post Here’s why I think the Brickworks share price is a top buy appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Amazon. 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 Lovisa Holdings Ltd (ASX: LOV) share price has dropped 27% in 2022. So could FY23 be a better year for the fast-fashion jewellery retailer?

It’s worth noting that despite the decline, Lovisa shares are still up by more than 300% over the past five years.

It seems ASX growth shares are on the nose in recent times with concerns about supply chains, inflation, and the prospect of rising interest rates.

However, with the Lovisa share price dropping but the company still displaying growth – is it an opportunity?

Growth and scalability

In the FY22 first half, Lovisa grew its revenue by 48.3%. Its earnings before interest and tax (EBIT) rose 59% and net profit after tax (NPAT) grew by 70.3%.

I think the result demonstrated that as Lovisa grows its revenue, it can benefit thanks to the operating leverage within the business. It has been focused on its cost of doing business (CODB) and efficiency while building the structure to support the company’s next stage of growth.

The sales growth momentum is continuing. Trading in the first eight weeks of the FY22 second half saw comparable sales growth of 12.1% year on year, with total sales growth of 61.7% on the same period in FY21. Lovisa said that the sales momentum had continued to the end of April 2022.

Its business model allows the business to generate gross profit margins of more than 75%.

Expansion plans

Lovisa said that it’s planning to keep expanding in its current markets. As at April 2022, it had added 59 new stores in FY22 to date.

The number of international stores is now 74% of its store network. It has added 38 new stores in the United States in the year to date. The US is a large opportunity for the ASX share and could be an important factor for the Lovisa share price.

The business is also focused on building its digital platforms globally as well as finding new markets to pilot the Lovisa brand.

I think that the business is in a good financial position to achieve this growth. Not only is it already generating good profit, but it has a strong balance sheet with no debt.

I believe that Asia and the US are particularly promising markets for the company to achieve long-term growth.

Valuation

The drop in the Lovisa share price makes it much more attractive to me, considering the sales and profit growth that it’s also achieving.

Using estimates from Macquarie, the Lovisa share price is now valued at 28 times FY22’s estimated earnings and 23 times FY23’s estimated earnings. If Lovisa can globally roll out an effective digital offering and keep growing its store network, I think it could be on track for an exciting future as it benefits from operating leverage.

As a bonus, it’s also giving investors a pleasing dividend. Macquarie thinks that the Lovisa grossed-up dividend yield could be almost 5% in FY23.

The post Will the Lovisa share price glitter in FY23? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Lovisa Holdings Ltd and Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In morning trade, the Appen Ltd (ASX: APX) share price has come under pressure again.

At the time of writing, the artificial intelligence data services company’s shares are down 2.5% to $6.24.

Why is the Appen share price falling?

Investors have been selling down the Appen share price on Monday amid weakness in the tech sector and news that the company’s shares will be booted out of the ASX 200 index at the next rebalance.

In respect to the latter, Appen is one of five companies that S&P Dow Jones Indices will remove from the benchmark index when it rebalances on 20 June.

Also being kicked out are metal detector company Codan Limited (ASX: CDA), fund manager Platinum Asset Management Ltd (ASX: PTM), medical device company PolyNovo Ltd (ASX: PNV), and payments company Tyro Payments Ltd (ASX: TYR). All of these shares are tumbling lower today along with Appen.

They will be replaced with artificial intelligence technology hopeful Brainchip Holdings Ltd (ASX: BRN), lithium developers Core Lithium Ltd (ASX: CXO) and Lake Resources N.L. (ASX: LKE), and coal miner New Hope Corporation Limited (ASX: NHC).

As you might have noticed, that’s five exits and only four additions. That’s because the ASX 200 has been home to 201 shares since Tabcorp Holdings Limited (ASX: TAH) demerged its Lottery Corporation Ltd (ASX: TLC) business. Both will remain in the ASX 200 index.

Why is this bad news for the shares been kicked out?

When companies are removed from the ASX 200 index, it means that index funds that track the ASX 200 will have to sell their shares and buy the shares of those being added.

In addition, some fund managers have strict investment mandates allowing them to only buy shares from certain indices. That would mean they would soon have to offload these shares in order to abide by their mandates.

Combined, this can add significant pressure to the sell side. Particularly when buyers are already few and far between for some of the outgoing ASX 200 shares.

The post Appen and PolyNovo tumble after being kicked out of the ASX 200 along with these shares appeared first on The Motley Fool Australia.

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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 Appen Ltd, POLYNOVO FPO, and Tyro Payments. The Motley Fool Australia has recommended Tyro Payments. 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 Adairs Ltd (ASX: ADH) share price has been through a lot of volatility in 2022.

It has mostly been negative for Adairs shares. In fact, the Adairs share price has fallen around 45% this year.

FY22 has been challenging for the business. The first half was affected by COVID-19 impacts, including store closures, which wiped millions off the expected earnings before interest and tax (EBIT).

But after the difficult decline, is the Adairs share price an opportunity?

Broker ratings on the Adairs share price

Let’s look at what brokers think of the business. A price target is where an analyst thinks that the share price will be in 12 months from the time of the rating.

The Adairs share price is rated as a buy by the broker Morgans with a price target of $3.50. That implies a possible rise of more than 50%.

UBS rates Adairs as a buy, with a price target of $5.20. That suggests a potential rise of around 130%.

While Ord Minnett only rates Adairs as a hold, the price target is $3.30. That implies a possible rise of almost 50%.

What are the positives on Adairs?

One of the main things that brokers have noted is the company’s acquisition of Focus on Furniture. This gave the business more exposure to the large furniture category.

Management is hoping to grow the Focus on Furniture store network across the country. Adairs is also planning to expand the range offered by the business. Another initiative is to grow the online sales of Focus, as well as the rest of the group. Adairs thinks that Focus on Furniture can reach sales of at least $250 million within five years.

Another thing that can help Adairs’ returns is the dividend. Based on the estimates, Morgans currently thinks that Adairs could pay a grossed-up dividend yield of 12% in FY22 and over 16% in FY23.

The company is also focused on upsizing some Adairs stores, growing its membership numbers and adding a physical presence for Mocka. Morgans likes the Mocka expansion potential.

In the second half of FY22, Adairs is expecting to open one or two new stores and upsize four to six existing stores.

Recent trading performance can be important for the Adairs share price. The business said that in the first seven weeks of FY22, its group like-for-like sales were essentially flat, down only 0.3%. However, including Focus on Furniture, total sales were up 33.8%. Mocka sales were up 14.8% and Adairs online sales were up 9.7% over the first seven weeks of the second half period of FY22.

The Adairs share price opens trade on Monday at $2.22.

The post What’s on the horizon for the Adairs share price in June? appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 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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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.

As the first part of 2022 so brutally reminded us, stocks can go down as well as up.  If you’re not prepared for that reality, then a market crash can feel incredibly terrifying to live through. After all, it feels like you’re watching your life savings slip away, often at the same time that your job seems to be at risk due to cost cutting driven by lack of investors’ or leadership’s confidence in the future.

In a world where that’s the ugly reality you’re facing, sleeping easy through a market crash might seem like an impossible dream. Believe it or not, it is possible to set yourself up to make it through a really rough market and wind up better on the other side. It takes pre-planning, discipline, and accepting the trade-offs that come with proper risk-management in your investments. With that in mind, here are four ways to sleep easy in a market crash.

No. 1: Have an emergency fund

One of the biggest challenges you’ll face is the fact that your costs don’t go away just because the stock market is down. Being forced to sell your stocks while they’re down to cover a bill is a great way to turn a temporary market dip into a permanent loss of capital. Recognizing that risk only after it’s staring you in the face adds a substantial amount of tension to what is already a bad time.

With an emergency fund that has three to six months of expenses in it, you have a buffer that can help you navigate through short-term challenges without immediately having to tap your long term money. That’s a huge benefit when it comes to sleeping at night.

Of course, in today’s inflationary environment, it may not be a great idea to have too much tied up in cash, since that cash is so rapidly losing purchasing power. That’s why it’s also important to balance your short-term cash needs with your longer-term financial plan to more completely manage the risks you face.

No. 2: Keep money you know you’ll need soon out of stocks

If you expect you’ll need money from your portfolio in the next five or so years, that money does not belong in stocks. Instead, it belongs in something like duration-matched Treasury or investment-grade bonds where you’ll have a higher likelihood of having the cash you’ll need when you need it. You won’t earn high returns on this money, but if the stock market happens to be crashing when those expected bills come due, you’ll be incredibly glad you had it in higher-certainty assets.

Knowing that you can still reach your important, nearer term life priorities even as the market is crashing around you is a critically important tool that can help you sleep at night. Like with an emergency fund, the lower returns you can expect to earn on this money mean you shouldn’t over save in this bucket, especially in a high-inflation environment. Finding the right balance can also be important in your ability to sleep easy during a market crash.

No. 3: Avoid portfolio margin

The margin that your broker likely offers you is a knife that cuts both ways. When the market is rising rapidly, it can magnify your returns and make you feel like an investing genius. Once the market turns sour, though, your losses will be magnified as well. As if that weren’t enough, most margin loans come with substantial interest attached. That interest gets charged based on the amount you borrowed, not based on the amount your portfolio is worth.

On top of all that, when you’re using margin and the market moves far enough against you, your broker can issue a margin call. When that happens, you must either come up with cash, liquidate holdings, or find another way reduce the risk profile in your account. If you don’t, then your broker will liquidate your positions for you until that call is satisfied.

Put it all together, and having margin takes the pain of a market crash and makes it substantially worse. Avoiding that margin goes a long way toward helping you sleep easy when the market is crashing.

No. 4: Recognize the value of what you own

Ultimately, a share of stock is nothing more than a small ownership stake in a company. That company has a value based on its ability to earn money over time. By estimating how much the company will earn over time, then adjusting for your stake in it, you can get a reasonable ballpark estimate of that value.

A technique like the discounted cash flow model can be useful on that front, as it can let you quickly change your estimates and come up with a range of values based on the scenarios you lay out. Because you’re dealing with the future, you’ll never get it perfect, but you can usually get close enough to make reasonable investing decisions.

With a tool like that on your side, you’ll start to see cases where a market crash is really an opportunity to buy great companies for less than they are really worth. Especially if you’ve done a great job with the other three ways to sleep easy in a market crash, this one can really help you sleep easy. After all, this is the one that can transform you from a panic seller into an opportunistic buyer, which can be a great way to see your net worth improve in any subsequent recovery that may follow the crash.

Get started now

It’s never easy to live through a market crash. Still, with some decent planning and a willingness to accept the trade-offs involved, you can get yourself to where you’re sleeping far easier even as the market is crashing around you.

It is far better to have your plans in place before the market crashes, but if the market’s recent decline is what it takes to get you to put a better plan in place, then so be it. At some point, the market will crash again. The plans you start putting in place today should serve as a great foundation for getting you ready to sleep that much easier whenever the next crash may come our way. 

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

The post 4 ways to sleep easy in a market crash appeared first on The Motley Fool Australia.

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Chuck Saletta 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. 

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

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The Liontown Resources Limited (ASX: LTR) share price is dropping on Monday morning.

At the time of writing, the lithium developer’s shares are down 3% to $1.23.

Why is the Liontown share price dropping?

The Liontown share price is on the slide on Monday morning after broad market weakness offset the release of a positive announcement.

According to the release, Liontown has completed negotiations with electric vehicle giant Tesla and executed a definitive full-form offtake agreement.

The agreement is for the supply of spodumene concentrate from the company’s flagship 100%-owned Kathleen Valley Lithium Project in Western Australia.

Liontown will supply up to 150,000 dry metric tonnes (dmt) per annum of spodumene concentrate, which represents approximately one-third of the project’s start-up production capacity of ~500,000 tonnes per annum.

The release explains that supply is expected to commence in 2024 and the offtake agreement is conditional upon Liontown commencing commercial production at Kathleen Valley no later than 1 December 2025.

This deal complements the company’s existing agreement with LG Energy Solution. That agreement is for the supply 100,000 dry metric tonnes in the first year, increasing to 150,000 tonnes per year in subsequent years.

Pleasingly, another deal may not be far off. Liontown revealed that it has received very strong interest from a range of parties for the remaining third offtake.

Once this is complete, it will result in approximately 85% of the production from Kathleen Valley being contracted. The remaining production will be sold on spot or to existing customers.

‘A tremendous achievement’

Liontown’s Managing Director and CEO, Tony Ottaviano, was pleased with the deal. He said:

We are pleased to have concluded negotiations with Tesla allowing us to execute our second full form Spodumene Concentrate Offtake Agreement. Tesla is a global leader and innovator in electric vehicles and having formalised arrangements for it to become a significant customer is a tremendous achievement.

This means that we now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers, marking a significant step towards realising our ambition to become a globally significant provider of battery materials for the clean energy market.

The post Liontown share price drops despite Tesla deal appeared first on The Motley Fool Australia.

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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.

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The Allkem Ltd (ASX: AKE) share price is falling on Monday.

In early trade, the lithium miner’s shares are down 2% to $11.60.

Why is the Allkem share price falling?

Investors have been selling down the Allkem share price on Monday following the release of announcement out of the company relating to pricing and its guidance.

According to the release, continued strong market conditions have positively impacted the price received for lithium carbonate from the Olaroz Lithium Facility during the current quarter.

As a result, The June quarter FY 2022 average price received for lithium carbonate is expected to be approximately 14% above its prior guidance at US$40,000 per tonne FOB on sales of approximately 3,500 tonnes.

Allkem highlights that its customers continue to value security of supply which is reflected in a fully committed order book for the remainder of the calendar year.

Spodumene production disappoints

Things haven’t been quite as positive for its lithium spodumene concentrate operations.

Realised spodumene concentrate pricing in the June quarter has been approximately US$5,000 per tonne SC6% CIF. This is in line with prior guidance and based on anticipated quarterly shipments of approximately 38,000 dry metric tonnes at an average grade of 5.3%.

However, this will only bring its full year spodumene production to 192,000 to 196,000 dry metric tonnes, which will be 2% to 4% short of guidance.

Management advised that this has been driven by production delays resulting from the highly competitive Western Australian resources labour market and COVID-19 related requirements. Strategies have been implemented to mitigate these temporary impacts on production.

No details have been provided about how this may have impacted its costs.

Argentina reference price

Finally, concerns over news that Argentina has set a reference price for lithium put pressure on the Allkem share price this month.

However, Allkem isn’t concerned by the development. It explained:

Argentina’s Customs Agency has recently set a reference price for lithium carbonate of US$53,000/t. This reference price is used by regulatory authorities when reviewing export sales of lithium chemicals to prevent under-invoicing and improve pricing transparency. This price is not used for calculation of taxes, royalties or duties and Allkem does not expect it will have any material impact on product exports, realised prices or profitability.

The post Allkem share price falls on mixed lithium update appeared first on The Motley Fool Australia.

More reading

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• One broker’s outlook for lithium supply and demand and what it could mean for ASX lithium shares
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• Is the Allkem share price selloff a buying opportunity?

Motley Fool contributor James Mickleboro has positions in Allkem Limited. 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 Qantas Airways Limited (ASX: QAN) share price has been having a good run in 2022 so far, but one top broker has flagged a potential weight on the airline’s recovery.

Citi equity analyst Samuel Seow reportedly believes a lack of pricing power in Qantas’ domestic operations could drag on the company’s bottom line.

At the time of writing, the Qantas share price is $5.49. That’s 6.6% higher than it was at the start of 2022.

For context, the S&P/ASX 200 Index (ASX: XJO) has slipped 4.6% this year, leaving Qantas’ stock outperforming by more than 11%.

Let’s take a closer look at what Citi predicts for the airline’s future.

Could this weigh on Qantas shares this year?

Australia’s tourism sector is bouncing back in 2022. In fact, many ASX 200 travel shares – including Qantas – are expecting to return to profitability in the near future.

The ‘flying kangaroo’ recently told the market it’s hoping to break even in financial year 2023.

Right now, its recovery is being led by demand for domestic travel. However, Seow is sceptical of the airline’s pricing power in the domestic segment, as reported by The Australian.

While international competition looks limited, it appears the reverse is the case in domestic, which is a larger contributor to profit.

With relatively soft domestic passenger data and an element of over servicing, we expect pricing power to be constrained domestically despite rising fuel.

Citi’s Samuel Seow, as quoted by The Australian.

The broker is also reportedly concerned that Qantas’ recovery might be slower in its more profitable routes – those between Sydney, Melbourne, and Brisbane.

Flights between the nation’s three largest cities are known as ‘the golden triangle’ of Australian aviation.

Perhaps unsurprisingly, other airlines – including Regional Express Holdings Ltd (ASX: REX) – have been jostling for a share of the lucrative market.

“Competition is picking up more market share on the golden triangle,” Seow said, as quoted by The Australian. “[That implies] some if not the majority of [Qantas’] capacity gains have been on less profitable routes.”

Citi reportedly has a $5.47 price target and a neutral rating on Qantas shares.

The post Could a lack of pricing power drag on Qantas shares in 2022? appeared first on The Motley Fool Australia.

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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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Crypto prices displayed plenty of their notorious volatility last month.

With more downs than ups, the combined global crypto market fell 28% in May.

Bitcoin (CRYPTO: BTC) declined 17% in May. At the current price, the world’s first crypto is down 56% from its 10 November record highs.

Ethereum (CRYPTO: ETH) lost even more ground, down 27% over the month, while meme token Dogecoin (CRYPTO: DOGE) dropped 37% in May.

Of course, that’s all-virtual water under the bridge now.

So, what might crypto investors expect in the month ahead?

For some insight into that answer, we reached out to two industry pros.

Crypto prices and US equity markets

Noting that crypto prices have fallen amid rising interest rates, especially from the influential US Federal Reserve, Simon Peters, market analyst at eToro, told The Motley Fool, “I think markets have priced in interest rate increases over this year now.”

Looking ahead to crypto prices in June and the rest of 2022, Peters said investor “focus is shifting to earnings and the possibility of a recession”.

According to Peters:

If these risks increase, we could see equity markets fall further. Given the high correlation between US equity markets and crypto, crypto prices could fall further also. Historically, crypto bear markets have seen declines from the all-time high of 80% or more. The fact that we are only down 56% from the all-time high on Bitcoin could suggest there is room for a further fall.

But there is a bullish case for crypto prices as well.

“With the recent sell-off in Bitcoin, we are now testing some interesting technical indicators,” Peters said.

He pointed out that the 200 weekly exponential moving average is historically where Bitcoin bear markets have tended to bottom out. “Also, with on-chain metrics, Bitcoin prices are trading down towards the Realized Price, which again is historically a significant support level,” he added.

And there’s the potential, Peters said, that if recession risks increase we could “see a decoupling from US equities, as investors look for Bitcoin and other cryptos as digital safe-havens”.

Positive adoption signals

Jonathon Miller, Kraken Managing Director for Australia, told us that there still looks to be plenty of appetite for cryptos on both the institutional and private levels, which could help support crypto prices in the month and year ahead.

According to Miller:

Recent macro events mean financial markets are undergoing a period of acute volatility. Despite this, we are still seeing positive adoption signals from institutions and individuals for crypto.

We’ve had the launch of crypto ETFs in Australia, global brands like Spotify and eBay enter the NFT space even as the market cools down, and the likes of Emirates set to accept crypto payments from customers.

And there are still plenty of advancements taking place in the crypto world.

“While price movements matter, it’s important to focus on the innovation happening in the space during these times and it’s quite clear there is still plenty happening and lots more to come,” Miller said.

The post What’s the outlook for crypto prices in June? Industry insiders weigh in appeared first on The Motley Fool Australia.

More reading

• 2 top cryptocurrencies to buy and hold for decades
• Why did crypto prices get massacred in May?
• Can the Ethereum price redeem itself in June? Crypto experts weigh in
• Has the Bitcoin price bottomed?
• Why is the Bitcoin price bouncing back this week?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia has positions in and has recommended Bitcoin and Ethereum. 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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