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With oil prices storming higher this year, the energy sector has been a great place to invest.

The good news is that one leading broker still sees plenty of upside for a couple of popular energy shares. Here’s what analysts at Morgans are saying about them:

Santos Ltd (ASX: STO)

The team at Morgans is very positive on Santos. Its analysts rate the energy producer highly due to its growth potential and diversified earnings base.

The broker explained:

We expect the resilience of STO’s growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development.

Morgans has an add rating and $10.00 price target on Santos’ shares. This compares favourably to the current Santos share price of $8.08.

Woodside Energy Group Ltd (ASX: WPL)

Another ASX energy share that Morgans rates highly is Woodside. The broker is bullish thanks largely to its upcoming merger with the petroleum assets of BHP Group Ltd (ASX: BHP). This merger was approved by shareholders last week.

Morgans commented:

We believe WPL has benefited from being in the right place, at the right time. With: 1) BHP/WPL having an existing relationship, 2) BHP eager to boost its ESG profile, and 3) WPL being a quality operator (safe hands which is important for BHP). From an economic standpoint we think WPL is getting the better of the deal, with synergies not baked into deal metrics and BHP willing to accept a discount. The deal is transformative, lifting WPL into being a top 10 global E&P with +2 billion barrels of 2P reserves, with EBITDA of US$4.7bn pa and growth options.

Morgans has an add rating and $33.60 price target on the company’s shares. This is meaningfully higher than the current Woodside share price of $28.77.

The post 2 ASX energy shares that brokers rate as buys for exposure to sky high oil prices appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Everything you need to know about the upcoming BHP dividend
• Why is the Woodside share price dropping 4% today?
• Here are the 3 most traded ASX 200 shares on Friday
• BHP share price higher following Woodside shareholder merger approval

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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If you’re looking for ASX 200 dividend shares to buy, then you may want to check out the two listed below.

Both have recently been named as buys by the team at Morgans. Here’s what its analysts are saying:

Macquarie Group Ltd (ASX: MQG)

The first dividend share that could be a buy is this investment bank. Morgans believes Macquarie is well-placed for long term growth and currently has an add rating and $215.00 price target on the company’s shares.

The broker said:

We continue to like MQG’s exposure to long-term structural growth areas such as infrastructure and renewables. The company also stands to benefit from recent market volatility through its trading businesses, while the company continues to gain market share in Australia mortgages.

As for dividends, the broker is forecasting partially franked dividends of $7.07 per share in FY 2023 and $7.47 per share in FY 2024. Based on the current Macquarie share price of $181.37, this will mean yields of 3.9% and 4.1%, respectively.

QBE Insurance Group Ltd (ASX: QBE)

Another ASX 200 dividend share that the broker rates highly is insurance giant QBE. Its analysts believe the company’s shares are cheap at the current level and have an add rating and $14.45 price target on them.

Morgans commented:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on ~14x FY22F PE.

In respect to dividends, the broker has pencilled in a 45 cents per share dividend in FY 2022 and then a 72 cents per share dividend in FY 2023. Based on the latest QBE share price of $12.47, this equates to yields of 3.6% and 5.8%, respectively.

The post Broker names 2 ASX 200 dividend shares to buy this week appeared first on The Motley Fool Australia.

More reading

• Is QBE considered an ASX dividend share?
• Can the Macquarie share price reach $200 again in 2022?
• Top brokers name 3 ASX shares to sell next week
• Top ASX dividend shares to buy in May 2022
• 2 ASX 200 dividend shares to buy according to a top broker

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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Friday, the S&P/ASX 200 Index (ASX: XJO) was on fire and raced notably higher. The benchmark index rose 1.15% to 7,145.6 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set to start the week in the red following a mixed night on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to open the day 15 points or 0.2% lower this morning. On Wall Street, the Dow Jones was flat, the S&P 500 was also flat, and the Nasdaq fell 0.3%.

Oil prices rise

Energy producers Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could have a positive start to the week after oil prices pushed higher. According to Bloomberg, the WTI crude oil price rose 0.35% to US$110.28 a barrel and the Brent crude oil price climbed 0.45% to US$112.55 a barrel.

Elders half-year results

The Elders Ltd (ASX: ELD) share price will be on watch when the agribusiness company releases its half-year results. According to a note out of Goldman Sachs, its analysts expect Elders to report a 13% increase in sales revenue to $1,245.2 million and a 27% lift in EBIT to $93.7 million. This would mean Elders “is on track to deliver towards the upper end of guidance for 20-30% EBIT growth in FY22.”

Gold price rises

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) will be on watch after the gold price traded flat on Friday night. According to CNBC, the spot gold price is fetching US$1,848.4 an ounce. This couldn’t stop the precious metal from adding 2% last week.

Woolworths share price is in the buy zone

The Woolworths Group Ltd (ASX: WOW) share price is in the buy zone according to analysts at Goldman Sachs. In response to its proposed acquisition of MyDeal.com Au Ltd (ASX: MYD), Goldman has retained its buy rating and $41.70 price target on the retail giant’s shares. While the deal is immaterial today, Goldman notes that the “key will be how WOW can leverage the capabilities and existing consumer assets of MyDeal to drive synergies with its existing business.”

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

More reading

• Everything you need to know about the upcoming BHP dividend
• Is the CBA share price a buy following the bank’s digital mortgage launch?
• Is QBE considered an ASX dividend share?
• These were the worst performing ASX 200 shares last week
• Woolworths share price lifts following $218m online marketplace deal

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 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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If you’re looking for an easy way to invest your hard-earned money, then exchange traded funds (ETFs) could be worth considering.

ETFs allow you to invest in a large group of shares through just a single investment. This can be good if you’re not sure which individual shares to buy but are keen on a particularly theme or index.

With that in mind, here are two ETFs that are popular with investors right now:

ETFS Battery Tech & Lithium ETF (ASX: ACDC)

The first ETF to look at is the ETFS Battery Tech & Lithium ETF. As its name implies, this ETF provides investors with exposure to a range of companies involved in battery technology and lithium mining.

These are the companies that look set to benefit greatly from the shift to clean energy and electric vehicles. Included in the ETF are shares such as AMG Advanced Metallurgical Group, Lockheed Martin, Mineral Resources Limited (ASX: MIN), and Pilbara Minerals Ltd (ASX: PLS).

Jessica Amir from Saxo Markets believes this ETF could be a top option for investors. She recently suggested that it could be good for investors that aren’t keen on stock-picking but want to gain exposure to the decarbonisation megatrend.

BetaShares Crypto Innovators ETF (ASX: CRYP)

Another exciting ETF to look at is the BetaShares Crypto Innovators ETF. This ETF could be a good alternative for investors keen to get exposure to the crypto industry but aren’t overly keen on owning coins.

BetaShares notes that the ETF allows investors to gain exposure to a portfolio of companies at the forefront of the crypto world. This includes crypto trading platforms, crypto mining and mining equipment firms, and other companies servicing crypto markets. Among its holdings you’ll find Coinbase, Silvergate, and Riot Blockchain.

Felicity Thomas from Shaw & Partners recently rated the ETF as a buy. She told Livewire: “It’s another buy from me. It’s off 45% from its original initiation price. […] it’s the picks and shovels of cryptocurrency in different companies, rather than direct cryptocurrency. You make money on the buyers and sales. So with ANZ and NAB and all the majors getting into cryptocurrency, I think it’s here to stay.”

The post 2 fantastic ETFs for ASX investors to buy next week appeared first on The Motley Fool Australia.

More reading

• 3 top ETFs for ASX investors to buy now
• Does the ETFS Battery Tech & Lithium ETF (ACDC) pay dividends?
• 3 high quality ETFs for ASX investors to buy this month
• 2 excellent ETFs for investors to buy in May
• 3 top ETFs for ASX investors to buy and hold for 10 years

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 Betashares Crypto Innovators ETF. 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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On 3 March, the Rio Tinto Limited (ASX: RIO) share price finished the trading day at $127.85. At Friday’s close, it was trading at $108.35. That’s a 15.2% drop compared to just a 0.08% fall for the S&P/ASX 200 Index (ASX: XJO) over the same time frame. This begs the question, is this an opportunity to buy the dip?

Buying the dip means buying a share after it has suffered a price decline. It’s always best to do so when the dip has nothing to do with the stock itself but is a result of general market fluctuations caused by broader macro-economic issues, like we’re seeing now.

It’s rising interest rates and inflation that are causing havoc with share markets globally. Investors are still getting their heads around these issues, as they haven’t seen them in play for many years, and that’s one reason why we’re seeing a lot of volatility in the markets right now.

Why buy the dip?

Investors with a buy the dip strategy love volatility. It gives them a chance to pick up desirable stocks like the big ASX blue chips for short or long-term capital gains and dividends.

It’s like going into a store and seeing your favourite item on sale. You know it’s high quality, and the only reason it’s on sale is that everything else is, too. So, why not take advantage of it?

What do the experts think of the Rio Tinto share price?

There are two notable brokers who are recommending Rio Tinto as a buy right now.

Goldman Sachs is bullish with a 12-month price target of $135.10 on Rio Tinto shares. That’s a potential 25% upside on today’s price.

Goldman reckons Rio’s exposure to many commodities commanding high prices will lead to material extra cash flow in the near term.

Goldman also likes the look of a bunch of growth projects currently underway. The broker reckons they’ll boost production — and hence earnings — soon.

Rio Tinto has been a big dividend payer in recent times, and Goldman expects this to continue. The broker is forecasting a US$9.30 per share dividend in FY22 and a US$8.80 per share dividend in FY23.

Taking the exchange rate and today’s share price into account, we’re talking dividend yields of between 11% and 12% for Rio Tinto investors.

Macquarie is the other broker advocating Rio. Macquarie says it is overweight on ASX resources shares and defensive shares in its strategy portfolio.

One reason for this is high commodity prices. Another is the broker’s belief that China will introduce new stimulus to restart its economy.

Rio Tinto is among a select group of ASX resources shares that Macquarie believes are well placed today. The others are South32 Ltd (ASX: S32) and BHP Group Ltd (ASX: BHP).

Macquarie notes that all three ASX shares have high current earnings. There’s also potential for extra earnings per share (EPS) in FY23 if spot commodity prices remain strong or go higher.

The post Down 15% since early March, is the Rio Tinto share price an ASX mining buy? appeared first on The Motley Fool Australia.

More reading

• Everything you need to know about the upcoming BHP dividend
• Why is the Woodside share price dropping 4% today?
• Why BHP, Chalice Mining, IGO, and Life360 shares are storming higher
• ASX 200 midday update: BHP, IGO, and Woolworths charge higher
• BHP share price higher following Woodside shareholder merger approval

Motley Fool contributor Bronwyn Allen has positions in BHP Billiton Limited and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Macquarie Group Limited. 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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Like moths to a flame, investors are currently finding ASX dividend shares very alluring.

The volatile share market this year has forced many to turn to income-producing ASX shares as protection against slowing capital growth.

But Celeste Funds executive chair Paul Biddle told the Australian Financial Review to be wary of false idols. 

“There are [a] lot of yield traps out there,” he said.

“You need to know that the small-cap company has a reasonable chance of making its revenue and earnings forecast, even if the economy slows.”

The businesses to look for are those with “a good handle on its cost base”. 

That means they can forward any supply cost pressures to customers, maintain margins, and eventually pay a healthy dividend.

Blackmore Capital chief investment officer Marcus Bogdan believes he’s found one such dividend stock:

No shortage of customers

Industrial real estate provider Goodman Group (ASX: GMG) last week released a performance update that was well-received.

But that hasn’t stopped the market punishing the Goodman share price down 16.4% over the past month and more than 28% for the year so far.

That just makes it attractive to Bogdan’s team though.

“Yeah, we like Goodman,” he told Switzer TV Investing.

“Unlike the broad spectrum of property stocks that are listed, there’s been a significant sell-off of between 20% and 25%. And now we’re starting to see some value.”

He likes the ongoing demand for Goodman’s distribution centres and logistics, which matches what modern e-commerce businesses need around the world. 

“That’s been reflected in an upgrade in their earnings,” said Bogdan.

“At the beginning of this financial year they forecast earnings were going to grow 10%. They upgraded that to 20%, then earlier this week they’ve increased that again to earnings per share growth of 23%.”

The Motley Fool’s James Mickelboro reported Goodman clients are continuing to “intensify warehousing in urban locations” and “increase automation and technology”.

“All in all, this has underpinned a 3.7% increase in like-for-like net property income and a 98.7% occupancy rate.”

Despite this year’s sell-off, Goodman shares have risen in excess of 123% over the past five years, and pay out a 1.1% dividend yield.

The post ‘We see value’ in this dividend ASX share: expert appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy today
• 3 ASX 200 shares defying today’s carnage to climb higher
• 2 top blue chip ASX 200 shares to buy now according to experts
• Top brokers name 3 ASX shares to buy today
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Tony Yoo 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Aristocrat Leisure Limited (ASX: ALL)

According to a note out of Morgans, its analysts have retained their add rating but trimmed their price target on this gaming technology company’s shares to $43.00. Morgans notes that Aristocrat delivered a stronger than expected half-year result. It also highlights that the company’s investment in product and partnerships paid off handsomely in the Americas Gaming segment and there was positive earnings growth in ANZ, International Class III Gaming, and Pixel United. All in all, the broker remains confident in the company’s long-term organic growth potential. The Aristocrat share price ended the week at $35.17.

Premier Investments Limited (ASX: PMV)

A note out of Citi reveals that its analysts have upgraded this retail conglomerate’s shares to a buy rating with a $29.00 price target. Citi is a fan of Premier Investments due to its belief that the Smiggle and fashion brands will be reopening winners. And while that may not be the case for the Peter Alexander brand, it still expects it to hold up reasonably well. The Premier Investments share price was fetching $22.69 at Friday’s close.

Webjet Limited (ASX: WEB)

Analysts at Goldman Sachs have retained their buy rating and $6.90 price target on this online travel agent’s shares. This follows the release of a full-year result that missed on earnings but outperformed significantly on cash flow generation. Looking ahead, the broker believes Webjet has a strong growth outlook and an equally strong cash balance which could help it take advantage of any value accretive opportunities. The Webjet share price was trading at $6.00 at the end of the week.

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

More reading

• Why the Aristocrat share price is surging again today
• Brokers name 3 ASX shares to buy today
• Webjet share price tipped to rise: Broker says it ‘hasn’t wasted a crisis’
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX shares today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Goldman Sachs. The Motley Fool Australia has recommended Premier Investments Limited and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Mineral Resources Limited (ASX: MIN) share price finished in the green on Friday, adding to its impressive gains over the past week.

At the closing bell, the company’s shares were up 0.83% to $59.82 apiece.

This means they have surged by more than 10% over the past five days of trading.

What do the experts think about Mineral Resources? 

Investors appear to be upbeat on the company’s prospects, sending the Mineral Resources share price higher.

While the company hasn’t released any news over the last few days, it did receive attention from one broker recently.

The team at Credit Suisse commenced its coverage of Mineral Resources with an initial outperform rating.

As such, the broker placed a bullish $73.00 price target on the company’s shares. Based on the current price, this implies an upside of roughly 22% for investors.

Credit Suisse is confident in the top-tier miner due to its large exposure to iron ore and lithium.

The company has a pipeline of mining projects for the coming years and is expected to grow further.

As my Foolish colleague James pointed out, analysts are forecasting the company to pay a dividend of 86 cents per share in FY22. However, this is anticipated to significantly ramp up to $4.41 per share in the following financial year.

The price of iron ore has rallied since hitting a 52-week low of US$91.98 in November 2021. Currently, the steel-making ingredient is fetching US$131.92 per tonne, an improvement of more than 43% over the six months.

In addition, the price of lithium carbonate has soared to 457,500 Chinese yuan per metric tonne (roughly A$97,000). This represents an increase of close to 420% in the past year.

Demand for electric vehicles has accelerated in recent times following a global push by world governments to low carbon emissions. To put that into perspective, electric vehicle deliveries in China are expected to reach five million units this year. This is in comparison to the three million sales achieved last year.

Mineral Resources share price snapshot

An uptick in iron ore and lithium prices since November 2021 has provided robust margins for the company.

However, the Mineral Resources shares price has predominantly moved in circles in 2022 to post a gain of around 6%.

On valuation grounds, Mineral Resources presides a market capitalisation of roughly $11.50 billion.

The post The Mineral Resources share price leapt 10% this week. Too late to buy? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX dividend shares to buy today
• Top brokers name 3 ASX shares to buy today
• Lighting up the market: ASX lithium stocks surge again on Tuesday
• ASX 200 midday update: Brambles takeover talks end, resources shares charge higher
• Do any ASX lithium stocks pay dividends?

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.

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There are a few different reasons why I like Fortescue Metals Group Limited (ASX: FMG) shares.

Fortescue is one of the world’s biggest iron ore miners along with BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

Fortescue is one of the larger positions in my share portfolio. However, I must acknowledge that the average purchase price for my shares is materially lower than the current Fortescue share price of $20.15.

I decided to invest in the business when the iron ore price was below US$100 per tonne. These are the three factors why I bought shares and plan to hold my investment for the long term:

Reputation for big dividends

There are two main ways for investors to benefit from shares – dividends and the rise in share prices.

As a resources business, Fortescue usually trades on a low price-to-earnings (p/e) ratio. When combined with a high dividend payout ratio, this can lead to a high dividend yield. The dividend yield can be particularly high when the relevant commodity price goes to a relatively high level.

Fortescue is benefiting from a reasonably strong iron ore price and this is translating to good cash flow and big dividends.

The dividend estimate on Commsec suggests Fortescue will pay a grossed-up dividend yield of 13.25% in FY22.

Green industry focus

Fortescue has a division called Fortescue Future Industries (FFI) which is aiming to decarbonise the iron ore miner’s operations. FFI also wants to help industries lower emissions in hard-to-abate sectors such as shipping, airplane fuel, trains, and so on.

FFI is building a portfolio of projects that will enable the business to create 15mt of green hydrogen per annum by 2030. It has entered into a memorandum of understanding with E.ON, to supply up to five million tonnes of green hydrogen by 2030. It has also established a ‘working alliance’ with Airbus to facilitate the decarbonisation of the aviation industry with green hydrogen.

I think FFI has a lot of potential if it’s able to execute on most of its goals. Trillions of dollars may be needed to be spent on decarbonisation in total in the coming years, which could benefit FFI and Fortescue.

Inflation hedge

In my opinion, some commodity businesses can prove to be an effective inflation hedge.

If there’s more money in the economic system and the same amount of commodities, it would be natural for commodity prices to go up.

Of course, commodity prices don’t perfectly track the inflation rate. Resource prices can see wild swings year to year or even quarter to quarter. Supply and demand is an important part of this.

Is Fortescue an effective inflation hedge? Time will tell. But, since the beginning of 2022, the Fortescue share price is essentially flat while the S&P 500 Index (SP: .INX) has fallen by around 20%.

Foolish takeaway

I’m not currently looking to buy more Fortescue shares, I’d prefer to buy at a cheaper price considering it’s already a decent size of my portfolio. However, I am quite optimistic about Fortescue’s long-term future with its green industrial endeavours.

The post 3 reasons why I plan to own my Fortescue shares for the long term appeared first on The Motley Fool Australia.

More reading

• How soon can Fortescue start making money from green hydrogen?
• What’s the outlook for Fortescue shares with Twiggy at the helm?
• Fortescue share price pushes higher following leadership changes
• ASX 200 midday update: BlueScope and Fortescue rise, Boral tumbles
• Why I think these are the best ASX dividend shares to buy right now

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group 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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Back in February, Zip Co Ltd (ASX: ZIP) announced that it would be moving to acquire its fellow ASX buy now, pay later (BNPL) share Sezzle Inc (ASX: SZL). At the time, this was the largest ever merger of two ASX BNPL shares if we don’t include Block Inc (ASX: SQ2)’s takeover of Afterpay.

But in the months following this announcement, both the Zip and Sezzle share prices have slumped. Badly.

Back in February, Zip held a capital raise to fund the Sezzle acquisition at $1.90 a share, which was a 14% discount to the Zip share price at the time. On Friday, Zip shares were going for 92 cents each after the company touched a multi-year low of 87 cents on Thursday. Likewise, Sezzle shares have fallen from over $2 in February to around 60 cents as of yesterday.

So these share price movements have caused some doubts as to whether the merger will still go ahead on the previously announced terms (or at all). Not that the companies have said anything.

Shotgun wedding: Will Zip investors pay later if it buys Sezzle now?

But one ASX expert investor is hoping that the merger doesn’t happen. According to reporting in the Australian Financial Review (AFR) this week, Andrew Brown, founder of hedge fund East 72, reckons Sezzle’s entire future is resting on the Zip acquisition, saying “I don’t see how they’re going to raise any capital, other than on the most distressed terms”.

But he’s not advocating Zip press ahead with the deal:

When you strip the balance sheet down basically in US dollars for Sezzle, they’ve got $US110 million in receivables, they’ve got $US95 million they owe the merchant interest program… They’ve got accrued expenses of $US14 million, so without Goldman and Bastion [Sezzle’s securitised funding lenders] if the merchants start wanting their money back… they’ve got a real problem…

The bigger question if you’re a Zip shareholder, which I obviously am not, is why is Larry Diamond [Zip’s CEO] effectively paying $200 million even at the much-reduced Zip share price… Because it’s a scrip swap for Sezzle, it’s not worth anything … somebody might look to buy Zip down the track, but Zip should not buy Sezzle; it should pay the fee and walk away.

So that’s pretty emphatic there. It will be interesting to see if this ASX BNPL marriage happens later this year, all of these things considered. But it’s fairly certain Mr Brown won’t be attending the wedding.

The post ‘Just horrific’: Why this fundie says Zip should abandon its Sezzle takeover appeared first on The Motley Fool Australia.

More reading

• The Zip share price is rocketing 6% today. Here’s why
• Zip just joined forces with another ASX 200 company
• Zip share price dives to yet another multi-year low
• Is the Zip share price set to hit another unhappy milestone this week?
• Why is the Zip share price down almost 25% in a month?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. 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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