Tag: Motley Fool

The S&P/ASX 200 Index (ASX: XJO) has seen a lot of volatility in 2022. How are things going for the Australian Foundation Investment Co Ltd (ASX: AFI), also known as AFIC, share price?

The ASX 200 currently registers a decline of 7.1% for the year. However, the index has been through a couple of declines – one during January 2022 and the latest drop over the last few weeks.

AFIC share price performance

AFIC, the biggest and one of the oldest listed investment companies (LICs), has also seen a decline since the start of 2022. The AFIC share price has dropped by 5.5%. That means that the LIC’s share price has outperformed by 1.6%.

Both AFIC and the ASX 200 represent portfolios of ASX blue-chip shares. The performance of those holdings will influence how the price of the LIC and ASX 200 perform.

In the ASX 200 are blue chips like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG), Wesfarmers Ltd (ASX: WES) and Telstra Corporation Ltd (ASX: TLS).

LIC holdings

The following are AFIC’s largest holdings and their weightings, at the end of April 2022. Readers may notice that the list of names is in a different order because the LIC has decided on a different weighting to the index:

CBA (9.1%)

BHP (7.4%)

CSL (7.2%)

Macquarie (5.1%)

Transurban Group (ASX: TCL) (4.6%)

Westpac (4.1%)

Wesfarmers (4%)

NAB (4%)

Woolworths Group Ltd (ASX: WOW) (3.1%)

Investment underperformance over one year

While the AFIC share price has gone up around 8% over the last year, the ASX 200 is down slightly by 0.6%.

However, when looking at the actual underlying investment performance in the year to 30 April 2022, AFIC disclosed that it has underperformed its benchmark.

The LIC’s net asset per share growth plus dividends, including franking, over the previous year was 9.6%. However, the S&P/ASX 200 Accumulation Index (ASX: XJOA) return over the same time was 11.7%.

However, AFIC isn’t necessarily trying to outperform an index in the short term.

It says that it “aims to provide shareholders with attractive investment returns through access to a growing stream of fully franked dividends and enhancement of capital invested over the medium to long-term.”

AFIC aims to provide low-cost investing. It has an annual management fee of 0.14%, with no performance fees. Its investment style is “long-term, fundamental, bottom-up”.

Market commentary

AFIC noted that corporate activity continued to be a “feature” of the market in April 2022 with a bid for Ramsay Health Care Limited (ASX: RHC), the restructuring of AMP Ltd (ASX: AMP) and a takeover bid for Pendal Group Ltd (ASX: PDL).

The LIC noted utilities as the strongest performing sector, partly thanks to the performance of the AGL Energy Limited (ASX: AGL) share price.

The materials sector declined 4.3% over April amid the easing of commodity prices because of ongoing lockdowns in China.

However, the weakest sector was IT, which fell 10.4%. AFIC explained the tech weakness was due to rising bond yields.

The post How is the AFIC share price performing with the ASX 200 volatility? appeared first on The Motley Fool Australia.

More reading

• Is the Telstra share price a safe haven buy right now?
• How to deal with the current share market calamity
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

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 CSL Ltd. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited and Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited, Ramsay Health Care Limited, and Westpac Banking Corporation. 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/OuRqhl2

The ResMed Inc (ASX: RMD) share price is heading north during early Wednesday morning.

At the time of writing, the sleep treatment focused medical device company’s shares are up 1.40% to $28.25.

Why are ResMed shares edging higher today? 

Following the company’s third quarter results released on 29 April, investors are eyeing ResMed shares as they go ex-dividend today.

While typically a company’s shares travel lower on the ex-dividend date, this hasn’t been the case this morning. This is because of the heavy losses ResMed has recorded in the past few weeks, hitting an 11-month low of $27.51 yesterday.

It appears that bargain hunters are swooping in to take advantage of the recent share price weakness.

What does this mean for ResMed shareholders?

For those eligible for ResMed’s quarterly dividend, shareholders will receive a payment of US 4.2 cents per share on 16 June. The dividend is unfranked, which means investors will unfortunately miss out on the tax credits.

The latest dividend reflects a 7.69% increase when compared to the prior corresponding period (US 3.9 cents per share).

In case you were wondering, the company does not have a dividend reinvestment plan (DRP).

Are ResMed shares a buy now?

Following the company’s financial scorecard, a couple of brokers weighed in on the ResMed share price.

The team at Goldman Sachs cut its 12-month price target by 6% to $33.70 for the healthcare company’s shares. Its analysts believe that there is still more upside in ResMed shares despite missing its performance targets recently.

Based on the current share price, this implies an upside of about 19% for investors.

Furthermore, Macquarie also slashed its rating on ResMed shares by 2.7% to $36.50 a pop. This also implies an upside of around 29% from where the company trades today.

ResMed share price summary

Over the past 12 months, ResMed shares have gained 14% on the back of positive investor sentiment. On the other hand, the S&P/ASX 200 Index (ASX: XJO) has fallen by 1% over the same timeframe.

ResMed shares reached a 52-week high of $40.49 in August, before backtracking amid inflationary movements and soaring living costs.

Based on today’s price, ResMed commands a market capitalisation of roughly $11.41 billion and has a trailing dividend yield of 0.56%.

The post Why is the ResMed share price climbing today? appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 profitable ASX growth shares with 40%+ upside
• Broker names 2 of the ‘best’ blue chip ASX 200 shares to buy now
• Hoping to bag the Resmed dividend? Read this
• Guess which ASX 200 shares are defying today’s sell-off to climb higher
• 2 medical tech ASX shares Morgans loves right now

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 recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. 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/QTd312R

The GrainCorp Ltd (ASX: GNC) share price is falling on Wednesday morning.

At the time of writing, the grain exporter’s shares are down 3% to $10.22 following the release of its half-year results.

GrainCorp share price falls despite record result

• Revenue up 49.9% to $3,842.1 million
• Earnings before interest, tax, depreciation and amortisation (EBITDA) up 200% to $427 million
• Net profit after tax up 382% to $246 million
• Fully franked interim dividend increased 50% to 12 cents per share
• Additional fully franked special dividend of 12 cents per share declared

What happened during the first half?

For the six months ended 31 March, GrainCorp reported a 49.9% increase in revenue to $3,842.1 million and a 200% jump in EBITDA to $427 million.

The latter was driven by strong growth across both the Agribusiness and Processing segments.

GrainCorp’s Agribusiness segment reported a 200% increase in EBITDA to $376 million. This reflects an increase in total grain handled and strong supply chain margins for grain exports. An increase in opening grain inventories also contributed to storage and export volumes.

Whereas the Processing segment delivered a 192% increase in EBITDA to $70 million for the half. This was driven by increased oilseed crush margins and ongoing efficiency improvements. Crush margins were supported by strong global demand for vegetable oils, thanks to global production challenges in canola and soybean, disruption of supply out of the Black Sea region, and strong demand for renewable fuel feedstocks.

This strong profit growth allowed the GrainCorp board to declare a 12 cents per share fully franked interim dividend and an additional 12 cents per share fully franked special dividend. This compares to an interim dividend of 8 cents per share a year earlier.

Management commentary

GrainCorp’s Managing Director and CEO, Robert Spurway, commented:

I am pleased to announce an exceptional first half result, which is a record for GrainCorp. The result reflects excellent performance across all business areas and resilience in our supply chain.

Recent weather patterns and continued La Niña conditions have provided excellent planting conditions for the 2022-23 winter crop to date, building confidence in grain supplies from ECA and further supporting export sales and supply chain margins.

GrainCorp is in a strong position to maximise opportunities through the current cycle, while also progressing our strategic initiatives in our core, growth and ESG areas. Planning is well underway for additional investment in the lead-up to the 2022-23 harvest to efficiently manage the volumes to be delivered by growers.

Outlook

Possibly weighing on the GrainCorp share price this morning is the company’s full-year guidance.

While a very strong result is expected, there has been no change to its previous guidance. Some investors may have been betting on another upgrade from management after two in as many months.

GrainCorp continues to guide to underlying EBITDA of $590 million to $670 million and underlying net profit after tax of $310 million to $370 million.

The post GrainCorp share price falls despite record-breaking half-year profits appeared first on The Motley Fool Australia.

More reading

• What’s driving the Graincorp share price to all-time highs?
• These were the best performing ASX 200 shares in April
• Why has the Graincorp share price already rallied 17% in April?
• These were the best performing ASX 200 shares last week
• Can the Graincorp dividend really triple in 2022?

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/JyDC8E3

The AVZ Minerals Ltd (ASX: AVZ) share price was scheduled to return from a trading halt this morning.

However, that won’t be the case after the lithium developer requested the suspension of its shares.

What’s going on with the AVZ share price?

AVZ shares have been suspended for a further nine days at the company’s request this morning while it sorts out an ownership dispute.

AVZ’s request states:

The voluntary suspension is requested in connection with the finalisation and release of an announcement in relation to its mining and exploration rights for the Manono Lithium and Tin Project. The Company anticipates that it will be able to make an announcement on this matter by commencement of trading on Friday, 20 May 2022.

What does this relate to?

This matter relates to the Dathcom Mining SA business.

It is the business that has been granted a mining license for the Manono Lithium and Tin Project. At present, AVZ owns a 75% stake and La Congolaise D’Exploitation Miniere SA (Cominiere) owns the remaining 25% stake.

Though, in exchange for a US$240 million investment to fund the development of the project, AVZ is about to sign over a 24% stake to Suzhou CATH Energy Technologies. In addition, Cominiere will shortly cede 10% of its interest to the Democratic Republic of the Congo Government.

This leaves AVZ with a 51% stake and Cominiere with a 15% stake.

AVZ believes it now has the rights to acquire Cominiere’s remaining 15% stake, which would bump its overall share of the project back to 66%. However, Cominiere has thrown a spanner into the works by selling it to a third-party – Jin Cheng Mining Company.

This brings us to today. In a separate announcement, the company revealed that Jin Cheng is taking legal action to secure the disputed stake.

AVZ commented:

[AVZ] has received a request for arbitration and related correspondence regarding the proposed commencement of arbitration proceedings by Jin Cheng Mining Company Limited (Jin Cheng) before the International Chamber of Commerce in Paris (ICC) to pursue claims by Jin Cheng to be recognised as a shareholder of Dathcom Mining SA (Dathcom).

As previously disclosed to ASX on 4 May 2021, any purported transfer of the 15% interest to Jin Cheng would be a material breach of the pre-emptive rights contained in the existing Dathcom Shareholders Agreement, invalid and of no force or effect. The Company is considering the request for arbitration and related correspondence and will continue to take all necessary actions to resist Jin Cheng’s vexatious and meritless claims and to protect Dathcom’s and its interests.

Jin Cheng clearly believes it has a strong shout for the stake, but time will tell if the court sees it the same way.

The post What’s going on with the AVZ Minerals share price? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 midday update: Westpac result impresses, AVZ halted
• Why is the AVZ share price halted today?
• These were the worst performers on the ASX 200 last week
• Which ASX 200 mining shares were the worst-performing on Friday?

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/GMvnKC7

The Pushpay Holdings Ltd (ASX: PPH) share price is on the slide on Wednesday morning.

At the time of writing, the donation technology company’s shares are down 5% to $1.12.

Pushpay share price lower on FY 2022 results

• Total Processing Volume increased by 10% to US$7.6 billion
• Operating revenue increasing by 13% to US$202.8 million including Resi Media acquisition
• Annual Revenue Retention Rate remained above 100% over the last five comparable periods ended 31 March.
• Gross margin remained consistent with the previous year at 68%.
• Operating expenses up 28% to US$83.4 million
• Underlying EBITDAF increased 8% to US$62.4 million
• Net profit after tax up 7% to US$33.4 million

What happened during FY 2022?

For the 12 months ended 31 March, Pushpay reported a 10% increase in total processing volume to US$7.6 billion. This was underpinned by a 31% increase in customer numbers to 14,508 and the acquisition of video streaming provider Resi Media.

Operating revenue increased 13% to US$202.8 million including Resi Media and 6% to US$190.6 million excluding the acquisition.

And while its gross margin remained consistent at 68%, operating expenses grew quicker than revenue at 28% to US$83.4 million over the period due to the inclusion of Resi Media and increasing investment in people.

This meant that Pushpay’s earnings before interest, tax, depreciation, amortisation, and forex (EBITDAF) and net profit grew at a more modest 8% to US$62.4 million and 7% to US$33.4 million, respectively.

Management commentary

Pushpay’s CEO, Molly Matthews, was pleased with the company’s performance in FY 2022 and the progress it is making with its long-term strategy. She commented:

Pushpay’s long-term growth strategy is focused on four areas – growing Customer numbers, increasing the number of Products utilised, expanding and enhancing Pushpay’s suite of products, and increasing share of wallet. Significant progress has been made executing against strategic priorities in each of these areas, setting the foundation for escalating growth in future years.

A number of initiatives were implemented during the year to respond to market headwinds, including to refresh and strengthen Pushpay’s go-to-market strategy and investment in talent and capability. A key highlight during the 2022 financial year was the acquisition of a leading video streaming provider, Resi Media in August 2021, which provides significant value and growth opportunities.

“Pleasingly, we are now seeing benefits from these actions, with the full benefits to be seen from FY24 onwards following a further year of investment, particularly in people and capability, in FY23.

Outlook

The weakness in the Pushpay share price today is likely to be down to its guidance for FY 2023.

Although management is expecting more of the same for its operating revenue, guiding to growth of 10% to 15%, it is forecasting a decline in its EBITDAF.

Pushpay is expecting underlying EBITDAF to be between US$56 million and US$61 million in FY 2023, which will be a decline of 2.2% to 10% year on year. This reflects the company’s investment in growth opportunities.

Looking further ahead, the company is targeting over US$10 billion of Total Processing Volume and more than 20,000 customers by the end of FY 2024.

Pushpay chair, Graham Shaw, commented:

After many years of building our business and with the recent expansion of Pushpay through two significant acquisitions, we are now focused on developing our business for the future and are investing in targeted strategic growth initiatives, in particular entry into the Catholic segment, Resi Media and other growth initiatives. This investment will continue through FY23, with escalating returns expected from FY24.

The unique opportunity ahead for Pushpay remains significant and we see substantial room for growth. We are focused on growing Underlying EBITDAF faster than revenue, and we will continue to invest to build our share of existing and new market opportunities and take advantage of the significant pipeline ahead of us. We are confident we have a clear strategy and strong leadership in place to continue delivering value for our Customers and our shareholders.

The post Pushpay share price down 5% on full-year results and weak guidance appeared first on The Motley Fool Australia.

More reading

• Why AUB, Block, BrainChip, and Pushpay shares are sinking
• Why Jumbo, Nufarm, Pushpay, and Vulcan Steel charged higher
• Pushpay share price soars 23% following takeover approach
• Are these 2 ASX tech shares buys in April?

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 PUSHPAY FPO NZX. The Motley Fool Australia has positions in and has recommended PUSHPAY FPO NZX. 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/S7xhnpu

The Magellan Financial Group Ltd (ASX: MFG) share price is on the move on Wednesday morning.

At the time of writing, the embattled fund manager’s shares are up 3.5% to $16.47.

Why is the Magellan share price rising?

Investors have been bidding the Magellan share price higher today after the fund manager named its new leader.

According to the release, the company has appointed David George as its new Chief Executive Officer and Managing Director, effective 8 August, following a global search.

The release notes that Mr George is a respected investment leader with over 20 years’ experience across analytical roles, investment management, and organisational leadership in Australia and Canada.

He most recently held the role of Deputy Chief Investment Officer, Public Markets at the Future Fund (Australia’s Sovereign Wealth Fund). While in the role, Mr George oversaw an asset base in excess of $170 billion and four teams comprising 25 investment professionals.

Magellan highlights that he was pivotal in driving investment processes and supporting a diverse and inclusive team culture. He was also a member of the Senior Management Team that led the overall strategic direction of the Future Fund.

“Outstanding investment management pedigree”

Magellan’s Chairman, Hamish McLennan, was very pleased to announce the appointment. He commented:

We are delighted to appoint David to the role of CEO and Managing Director. He has deep funds management experience developed over a career in Australia and Canada. As an external hire, David brings an outstanding investment management pedigree, a strong client service and results orientation and fresh perspectives to our team. The Board was unanimous in its view that David is the right person to lead Magellan.

Magellan is in strong financial health and we are executing on our investment strategies, capital management programme and staff retention initiatives. We acknowledge that there is more work to do. I am very confident that David, working with Magellan’s best-in-class team, will achieve strong client outcomes over the years.

Judging by the Magellan share price performance today, the market feels the company will be in safe hands with Mr George.

The post Why is the Magellan share price charging higher today? appeared first on The Motley Fool Australia.

More reading

• Why A2 Milk, Imugene, Liontown, and Magellan shares are tumbling lower
• ASX 200 midday update: Westpac result impresses, AVZ halted
• Magellan share price sinks following $140 million Guzman sale
• Top brokers name 3 ASX shares to sell next week
• These were the best performers on the ASX 200 last week

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/unSa5fP

The EML Payments Ltd (ASX: EML) share price has been heavily punished in 2022. It’s down by a hefty 55% since the start of the year.

In the last month alone, it has plunged more than 48% and, over the past year, is 73% lower.

But some brokers think that the EML share price can bounce back in a big way. One of those brokers is Ord Minnett.

The company’s latest selldown happened after EML’s quarterly update for the three months to 31 March 2022. It wasn’t as good as Ord Minnett had been hoping.

Quarterly recap

Looking at the numbers, EML reported that its quarterly gross debit volume (GDV) was $23.9 billion, up 408%.

Revenue was up 21% to $59.8 million, with gross profit increasing 17% to $42.2 million. However, underlying overheads jumped 50% to $28.6 million.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 14% to $13.6 million and underlying net profit after tax and amortisation (NPATA) fell 22% to $8.1 million. Profitability can have an impact on the EML share price.

EML explained that the gross profit margin was impacted predominately by higher negative interest and lower establishment fees in Europe. It said that changes to its treasury investment policy will begin to offset these costs in the fourth quarter.

The overheads rose because of an increased headcount in Europe, increased IT expenditure and the inclusion of the acquired business Sentenial (which accounted for 25% of the increase).

After this quarterly update, the company reduced its FY22 guidance. It said that operational execution issues in Europe and a more risk-averse approach impacted the launch of new programs. It’s expecting continued challenges in the fourth quarter which have led to a reduction in the guidance range.

New FY22 guidance

In FY21, EML generated underlying EBITDA of $53.5 million. The previous guidance range was between $58 million to $65 million. The new guidance is for a range of between $52 million to $55 million.

EML generated $32.4 million of underlying NPATA in FY21. In FY22, it was previously expecting to make between $27 million to $34 million of NPATA. Now underlying NPATA is expected to be between $27 million to $30 million. That’s a reduction of the mid-point of the guidance.

Ord Minnett on the EML Payments share price

The broker has a buy rating on the business, with a price target of $2.95. That suggests a possible rise of more than 100% in the next 12 months. But who knows what’s going to happen next?

Ord Minnett points to a number of things that aren’t helping the business right now, however, its valuation looks attractive. It also notes that EML operates in a growing industry and it has the potential to do well.

Based on current projections from the broker, the company is expected to make a net profit in FY23 and the EML share price is valued at 32 times FY23’s estimated earnings.

The post EML share price pummelled: Here’s why this expert sees 100% upside appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Why are EML shares making news this week?
• These were the worst performing ASX 200 shares in April
• These are the 10 most shorted ASX shares
• These were the worst performing ASX 200 shares last week

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 EML Payments. The Motley Fool Australia has positions in and has recommended EML Payments. 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/nris8VZ

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

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

What happened 

Shares of Netflix (NASDAQ: NFLX) were rising this afternoon after The New York Times reported that the company could launch an ad-supported video streaming tier earlier than Netflix’s management previously said.  

The video streaming stock was up by more than 5% today and had gained 2.8% at the end of the trading day. 

So what

According to The New York Times, Netflix told employees that it could launch its ad-supported, lower-priced tier in the last calendar quarter of this year. If true, that would be significantly faster than management’s earlier timeline of one to two years. 

Additionally, Netflix said in the note that it’s going to start cracking down on password sharing by the end of this year as well, by charging a fee to users who do so. 

The two moves come after Netflix lost 200,000 subscribers in its first quarter, which was the company’s first subscriber loss in 10 years. 

In the past, Netflix had always been against a lower-priced tier supported by advertising. But Netflix’s co-founder and co-CEO Reed Hastings said on the first-quarter call that while he’s always been a big fan of the subscription video streaming model, Netflix is considering an ad-supported tier because he’s a “bigger fan of consumer choice.” 

Now what 

As of this writing, Netflix hasn’t officially announced an ad-supported tier, but investors are nonetheless happy to see that the company appears to be moving quickly in this direction. 

With subscriber growth slowing and Netflix’s share price down 64% over the past 12 months, investors are looking for any changes at the company that could help boost revenue and get more people signed onto the company’s video streaming service. 

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

The post Here’s why Netflix stock climbed higher today appeared first on The Motley Fool Australia.

More reading

• Should investors start to question Netflix’s pricing power?
• Have ASX tech shares finally reached the bottom?
• Why Netflix stock was falling again today
• 3 reasons to buy Netflix, and 1 reason to sell
• Better buy: Netflix vs. Twitter

Chris Neiger 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 Netflix. The Motley Fool Australia has recommended Netflix. 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/FSJv1Tf

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

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

What happened

Shares of several consumer fintech companies fell today after the popular artificial intelligence lender Upstart (NASDAQ: UPST) disappointed the market with its latest earnings results and guidance.

Shares of buy now, pay later company Affirm (NASDAQ: AFRM) were trading nearly 16% lower as of 12:09 p.m. ET today, shares of the one-stop financial services company SoFi (NASDAQ: SOFI) were trading nearly 18.5% lower, and shares of the digital marketplace bank LendingClub (NYSE: LC) were trading about 9% lower.

So what

Last night, Upstart reported adjusted diluted earnings per share of $0.61 on total revenue of $310 million for the first quarter of 2021, both numbers that beat analyst estimates. However, Upstart also lowered its revenue guidance for the full year from $1.4 billion to $1.25 billion. The stock plummeted and as of this writing had fallen roughly 60%.

While the company increased its contribution margin guidance, it also lowered its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for the full year. Additionally, Upstart earlier this year guided for $1.5 billion of auto loan originations in 2022, but now it seems that goal may be in question as well.

Over the past few months, the Federal Reserve has raised its benchmark overnight lending rate aggressively, by 0.75% in two meetings, sparking concerns among investors that it might tip the economy into a recession. Upstart is currently in the business of originating online personal and auto loans to a range of borrowers across the credit spectrum. These kinds of debt are often some of the first that consumers will stop paying down when they start to face financial pressure. Already, Upstart has seen default trends normalize as help from stimulus has gone away. 

With all these concerns, Upstart’s partners that actually fund and invest in Upstart loans have asked for higher returns, as there is now a higher likelihood that consumers will default in the future and as investors are facing their own higher funding costs. This has resulted in Upstart having to raise pricing on its platform for borrowers. Higher interest rates may also push out of qualification some borrowers who qualified for certain loans based on certain investors’ risk appetite. All of this will result in lower loan transaction volume and lower conversion rates, which is how Upstart generates the large majority of its revenue.

Upstart also had to hold a small portion of loans that it normally sells to investors on its balance sheet in the first quarter, which spooked investors. That’s because some of Upstart’s investors, particularly those in the capital markets, are still determining what kind of risk they want to take on, which has resulted in a lack of funding for Upstart loans. Upstart’s management has said this is temporary, but the company is supposed to act as a marketplace, and if funding in the capital markets dries up, that would be extremely problematic for future growth.

Now what

Affirm, SoFi, and LendingClub seem to be taking the hit because the market is clumping all these consumer fintech lenders together with Upstart. In Affirm’s case, I can understand the concerns because the company is also somewhat beholden to the capital markets to fund and take on a large portion of its loans.

But I don’t think LendingClub and SoFi deserve to be clumped in here because both now have bank charters. Bank charters give them access to cheaper deposits, which they can use to fund a large portion of their loans, making them much less reliant on the capital markets.

Additionally, while Upstart originates loans to borrowers all over the credit spectrum, LendingClub and SoFi lend more heavily to prime borrowers and above, who were less affected by stimulus funds and are in much better financial shape. SoFi will report earnings results for the first quarter of 2022 after the market closes today.

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

The post Why the Affirm share price is tumbling today appeared first on The Motley Fool Australia.

More reading

• Is global e-commerce really at risk?

Bram Berkowitz has positions in LendingClub and has the following options: long January 2023 $45 calls on LendingClub and long January 2023 $48.42 calls on LendingClub. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Affirm Holdings, Inc. and Upstart Holdings, Inc. The Motley Fool Australia has recommended Upstart Holdings, 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/u9ZecaW

It’s a scary time to be an investor in ASX shares at the moment.

It was volatile enough already this year with inflation and interest fears, a war in Ukraine, and new COVID-19 lockdowns in China.

But now as fears turn into the reality of actual interest rate rises, there is a degree of panic among ASX share investors.

Since 21 April, the S&P/ASX 200 Index (ASX: XJO) has lost 7.5%.

“It is often said markets take the stairs up but the elevator down and that was definitely the case in April,” said Ophir Asset Management co-founders Steven Ng and Andrew Mitchell in a letter to clients.

It’s not easy seeing your portfolio turn into a sea of red.

But almost every long-term fund manager will remind you that these are the times to be mentally tough and stay the course. Don’t give up.

Ng and Mitchell were telling their clients exactly this in their letter this week, in a poetic way:

If you can keep your head when all about you

Are losing theirs and blaming it on you;

If you can trust yourself when all men doubt you,

But make allowance for their doubting too;

…

If you can meet with triumph and disaster

And treat those two impostors just the same;

If, by Rudyard Kipling

Ng and Mitchell said Kipling’s words reminded everyone that investing is as much about controlling your emotions as it is about buy and sell prices.

“Investors often dramatically underestimate the value of ‘keeping your head when all about you are losing theirs’.”

They recognised that in times of market turmoil, human instinct is to get off the scary rollercoaster to stand on the safety of firm land.

But selling out when markets are plunging is a recipe for disaster in the long run.

“Equities tend to outperform over the long term,” Ng and Mitchell said.

“So if the underlying investment thesis remains intact, and the stock’s fundamentals have not deteriorated, or the manager’s process is working but their style is simply out of favour, selling at the bottom and buying at the top will rarely be profitable.”

When you stay the course for the long term, temporary “macroeconomic” events like inflation, rising interest rates, wars, and supply chain constraints become just small bumps in the road.

“Virtually all that matters in the long term is the ability of the companies to grow earnings through time,” their memo read.

“Here it’s all about things like unique products or services, customers’ willingness to pay, addressable markets, and intensity of competition.”

In other words, they are all factors that the business can control.

Portfolio adjustments the Ophir team has made

One part of Kipling’s poem is “make allowance for their doubting too”.

As such, while practising patience and not selling out at the bottom, investors must always review their portfolio for improvements.

While emphasising that their portfolio remains largely intact and that this is not a “wholesale” change in strategy, Ng and Mitchell’s team has made some minor adjustments.

1. Decreasing consumer discretionary exposure
2. Increasing defensive growth exposure
3. Moving up the average market capitalisation of its holdings

They feel shifting away from consumer discretionary ASX shares is a wise idea in light of rising interest rates and less consumer interest.

Defensive growth shares, which are businesses “trading at reasonable prices” and are less dependent on economic expansion for their own growth, could better withstand a downturn.

And reducing exposure to its least liquid holdings is a defensive move before any economic slowdown.

There is one advantage to investors in a slowing economy, according to Mitchell and Ng.

“The bright side of slower economic and earnings growth, if that eventuates, is that those businesses that can structurally grow their earnings will become a scarcer commodity again,” read their memo.

“What becomes scarce typically becomes valued by the market, and gets bid up.”

The post How to deal with the current share market calamity appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• The Novonix share price just rebounded 13%. Is it a buy?
• Pendal share price surges as profit soars 60%

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.

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