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S&P/ASX 200 Index (ASX: XJO) tech shares are being slammed on Tuesday after the Nasdaq Composite (NASDAQ: .IXIC) continued to tumble into market crash territory overnight.

The tech-heavy US-based index extended its slump in Monday’s session overseas, recording a 4.29% fall and bringing its losses for the last six weeks to 20.5%.

Seemingly in reaction, the S&P/ASX 200 Information Technology Index (ASX: XIJ) is plunging 1.25% at the time of writing, having sunk by almost 5% in early trading. It’s being dragged down by most of the ASX’s prominent tech shares.

For context, the ASX 200 is recording a 1.63% slip right now.

Let’s take a closer look at what’s going on with the Nasdaq Composite and its impact on ASX 200 tech stocks.

ASX 200 tech shares’ Tuesday tumble

ASX 200 tech shares are suffering after the US tech-heavy index tumbled amid continued concerns about rising interest rates.

The Nasdaq Composite ended yesterday’s session in the red, as did the S&P 500 Index (SP: .INX) and the Dow Jones Industrial Average Index (DJX: .DJI). The latter indexes fell 3.2% and 1.99% respectively on Monday.

Their continued downturn follows the US Federal Reserve’s decision to raise interest rates by 0.5% last week, according to reporting by Reuters.

Nasdaq giant Tesla Inc (NASDAQ: TSLA) was one of the index’s biggest weights overnight, recording a 9% fall.

Back on the ASX on Tuesday, the tech sector is being dragged down by Block Inc (ASX: SQ2). Its share price is tumbling 10.27%.

Meanwhile, stock in NextDC Ltd (ASX: NXT), Computershare Limited (ASX: CPU), Novonix Ltd (ASX: NVX), and Altium Limited (ASX: ALU) are recording drops of 4.6%, 2.6%, 2.2%, and 1.7% respectively.

Though, it’s not all dire among the ASX’s biggest tech stocks.

Shares in Life360 Inc (ASX: 360), Tyro Payments Ltd (ASX: TYR), and Iress Ltd (ASX: IRE) are leading the sector. They’re gaining around 3.9%, 2.4%, and 2.1% respectively.

The Xero Limited (ASX: XRO) share price is also in the green.

The ASX 200 tech sector has plummeted more than 23% since its most recent high in early April. It’s also more than 33% lower than it was at the start of 2022.

The post Technophobia? Why ASX 200 tech shares are getting hammered again appeared first on The Motley Fool Australia.

More reading

• 2 quality ASX shares to buy in this volatility: experts
• Why is the Block share price plunging 11% on Tuesday?
• Unprecedented: Does this event mean we’re now in a bear market?
• 5 things to watch on the ASX 200 on Tuesday
• Xero share price slumps to lowest price since 2020. Broker tips 50% upside

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Block, Inc., Life360, Inc., Tesla, Tyro Payments, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended Block, Inc., WiseTech Global, and Xero. 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 Insurance Australia Group Ltd (ASX: IAG) share price is in the green in the past month, but could it go higher?

IAG shares have jumped more than 6% since market open on 11 April and are currently trading at $4.63 apiece. That’s up 0.22% on yesterday’s closing price. For perspective, the S&P/ASX 200 Index (ASX: XJO) is down 2.27% at the time of writing.

Let’s take a look at the outlook for this insurance company.

Could the IAG share price go higher

Wilsons analysts have named IAG as a ‘defensive growth’ share that could be a buy in turbulent times.

In a memo to clients, the team predicted the next couple of months will be edgy as rates rise. Wilsons said:

The narrative has changed slightly over the last month with defensives starting to outperform the market.

Our picks are healthcare, insurance and telco.

IAG was named specifically by Wilsons. Other defensive shares recommended included CSL Limited (ASX: CSL), Healthco Healthcare and Wellness REIT (ASX: HCW), and Telstra Corporation Ltd (ASX: TLS).

The IAG share price climbed 3.65% in the month of April, outperforming the ASX 200 index. As my Foolish colleague Brooke reported recently, IAG offers a dividend reinvestment plan (DRP). This provides shareholders the opportunity to receive IAG dividends as new shares instead of cash.

Share price snapshot

Despite falling 10% in the past year, the IAG share price has jumped more than 8% year to date.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has slumped 3% in the past year.

IAG commands a market capitalisation of around $11.3 billion based on the current share price.

The post The IAG share price has gained 6% in a month. Is this just the beginning? appeared first on The Motley Fool Australia.

More reading

• 4 ‘defensive growth’ ASX shares to buy in turbulent times: Wilsons
• Does IAG have a dividend reinvestment plan?
• What happened to the IAG share price in April?
• How does the IAG dividend compare to QBE?
• The IAG share price has lost 10% since February. Is it an opportunity?

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 Insurance Australia Group Limited and Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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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.

2022 has been ugly for the stock market, and after a volatile week to start out the month of May, investors came back to Wall Street on Monday without much in the way of confidence. As of 12:30 p.m. ET, the Nasdaq Composite (NASDAQINDEX: ^IXIC) was down another 2.7% after having been down even further earlier in the day.

The rout in technology stocks and other high-growth companies continued on Monday, as investors kept focusing on the potential impact of higher interest rates on long-term growth and economic conditions. However, other financial markets have also seen pressure from the current macroeconomic and geopolitical situation. Cryptocurrencies were a big loser on Monday as well, and as you’ll see in more detail below, those declines had a negative impact on crypto stocks Coinbase Global (NASDAQ: COIN) and MicroStrategy (NASDAQ: MSTR).

Why crypto weighed on the markets

Cryptocurrencies were broadly lower, even among the most popular and highest-profile digital assets. Bitcoin (CRYPTO: BTC) dropped nearly $2,300 to $32,300, while Ethereum (CRYPTO: ETH) was down more than $150 to fall below the $2,400 mark. Losses for smaller digital assets were even more pronounced, with Shiba Inu and Polkadot falling more than 14%.

Part of the problem with the crypto market is that it has been highly correlated to the fortunes of the Nasdaq lately. Because blockchain has substantial technological elements to it, it’s natural for investors to think of it as having similar prospects to other types of cutting-edge technology. With the Nasdaq having so many of those high-growth tech stocks, it makes sense that correlations could be high.

Yet there were also some crypto-specific issues that hit markets over the weekend. In particular, the stablecoin TerraUSD caused ripples across the asset class when it briefly lost its peg to the U.S. dollar. That sent the value of the related Luna cryptocurrency plunging, and it remains down almost 14% Monday afternoon. If investors can’t count on stablecoins being freely exchangeable for their corresponding amount of fiat currency, cryptocurrency markets face a challenge they’ll have to resolve in order to attract more mainstream adoption.

Companies counting on crypto

The ripple effects of cryptocurrency fluctuations weighed on stocks of companies that rely on healthy market conditions for digital assets. Coinbase has become one of the most prominent cryptocurrency exchanges in the global market, but it relies on transaction volume to drive much of its revenue. With sales based on percentages of total trades, adverse market conditions that force crypto traders to cut back on their buying and selling have a direct negative impact on Coinbase’s health. That’s a big part of why the stock is down more than 15% Monday afternoon.

In addition, some companies have turned to Bitcoin and other digital assets as alternatives to U.S. dollar cash holdings. MicroStrategy in particular has become famous for its devotion to Bitcoin, holding 129,218 tokens as of March 31. Today’s losses alone work out to more than $250 million in reduced value for MicroStrategy, and given that the company has taken on leverage to buy more cryptocurrency and has a market capitalization of just $2.7 billion, the volatile fluctuations in Bitcoin’s value create substantial financial risk if crypto prices don’t reverse higher in short order. Shares of MicroStrategy were down 19%.

Many investors have dismissed cryptocurrencies as poor alternatives to other investment assets. However, even if you don’t hold crypto yourself, the market has become large enough that disruptions can have impacts on other financial markets. That makes it important to keep your eyes on the cryptocurrency arena as you try to put together the best portfolio for your needs. 

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

The post Why these 2 Nasdaq crypto stocks are getting crushed today appeared first on The Motley Fool Australia.

More reading

• Why Bitcoin, Ethereum, and Coinbase Jumped Today
• The Betashares Crypto Innovators ETF has dumped 23% in a month. Is it now a bargain?

Dan Caplinger 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 Bitcoin, Coinbase Global, Inc., Terra and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended MicroStrategy. The Motley Fool Australia owns and has recommended Bitcoin, Ethereum and Luna. 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 Flight Centre Travel Group Ltd (ASX: FLT) share price has seen its fair share of ups and downs since the S&P/ASX 200 Index (ASX: XJO) travel share first listed in December 1995.

The biggest down, as you’re likely aware, came in the month following the onset of the global pandemic in early 2020.

But when was the best day ever for the Flight Centre share price?

Flight Centre share price closes for all-time high

That day was 20 August, 2018.

By the time the closing bell rang the Flight Centre share price stood at $69.36, a long way from the current price of $20.13.

Investors at the time were rewarding the company for record full-year financial results for 2018, released the prior week. Those results included all-time high underlying profits before tax of $384.7 million, up 17% from the prior year and 2% higher than Flight Centre’s previous record profits from FY 2014.

The ASX 200 travel share also reported a record total transaction value (TTV) of $21.8 billion for FY 2018. The company paid out a final dividend of $1.07 per share, which brought its full 2018 financial year dividend to $1.67 per share.

Flight Centre has not paid a dividend since the onset of the COVID crisis saw travel grind to a halt in early 2020.

How has the ASX 200 travel share faired recently?

While the Flight Centre share price is well off its all-time highs from August 2018, shares are up 27% over the past 12 months. That compares quite favourably to the 3% loss posted by the ASX 200 since this time last year.

However, some analysts are now cautioning that ASX travel shares look fully valued at current prices under current market conditions.

According to Neil Margolis, lead portfolio manager at Merlon Capital Partners (courtesy of the Australian Financial Review): “While pent-up demand might result in super-profits for travel stocks, most of this is already reflected in the share prices.”

The post When was the best ever day on the Flight Centre share price chart? appeared first on The Motley Fool Australia.

More reading

• Unprecedented: Does this event mean we’re now in a bear market?
• Leading brokers name 3 ASX shares to buy today
• Are ASX 200 travel shares already fully valued in May?
• These are the 10 most shorted ASX shares
• Top brokers name 3 ASX shares to sell next week

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 Flight Centre Travel 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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What a rollercoaster year it has been for the Zip Co Ltd (ASX: ZIP) share price.

From reaching an all-time high of $14.53 around 12 months ago to bottoming out to a multi-year low of 97 cents today.

To save you doing the math, that represents a fall of almost 94% if you invested at the peak. Which means, the Zip share price will need to rocket more than 900% to recover from the above losses.

Although the buy-now pay-later (BNPL) company’s shares have staged a mini comeback in the last hour, they are still 75% down compared to pre-pandemic levels.

What’s going on with Zip shares?

At the time of writing, Zip shares are down by 2.45% to 99.5 cents following turmoil across global markets.

The old age saying, “When America sneezes, Australia catches a cold” couldn’t be more right.

Over the last few days, Wall Street losses have heavily impacted the ASX. The S&P/ASX 200 Index (ASX: XJO) is down over 5% for the past week alone.

Investors have pulled out of their investments over fears about rate hikes kicking off a global economic slowdown.

In particular, the S&P/ASX All Technology Index (ASX: XTX) has been hit hard, down roughly 10% since this time last week.

This has also put a squeeze on other similar companies such as mobile payment provider Block Inc CDI(ASX: SQ2), Splitit Payments Ltd (ASX: SPT), and Humm Group Ltd (ASX: HUM).

The Reserve Bank of Australia (RBA) lifted its official cash rate by 0.25% earlier this month.

Notably, this is the first time the RBA has increased its rates since the Julia Gillard era in November 2010.

While the official cash rate stands at 0.35%, it is widely expected there will be further rate hikes to come.

The RBA is using its tools to curb inflation which has risen 5.1% on an annualised basis.

What this means is that consumers are less likely to spend on discretionary items when interest rates are picking up. The cost of debt such as credit cards as well as personal loans will require extra payments, affecting consumer spending habits.

Zip share price summary

Over the past 12 months, the Zip share price is down 87%, with year to date down more than 77%.

Based on the current Zip share price, the company has a market capitalisation of around $670.08 billion.

The post It’s happened: Zip share price tumbled below $1 for first time since 2018 appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Over 20 million new Zip shares will soon be available to trade. What does this mean for the share price?
• Why is the Zip share price making a partial recovery this afternoon?
• Why ARB, AVZ, Temple & Webster, and Zip shares are sinking
• The Zip share price is plunging 9% today. Here’s why

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 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 Australia has recommended Humm 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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ASX growth shares that are increasing revenue, achieving higher profit margins, and growing their scale could be potential investment options to consider.

The current volatility may be opening up the opportunity to look at some businesses which are now at a cheaper value than at the start of 2022.

With that in mind, here are two ASX growth shares:

Lovisa Holdings Ltd (ASX: LOV)

The company describes itself as a “fast fashion” jewellery business. It has around 590 global stores across 22 markets.

Lovisa says it is investing in its structures to support future growth. It’s seeing “strong” digital growth and it’s going to keep investing in its digital operations. The company boasts about having a strong balance sheet, with no debt.

It’s going to keep expanding in its current markets such as the US and Europe. During the first half of FY22, it opened 42 net new stores. HY22 also saw sales growth of 36%. It sees opportunities to expand into new markets.

In the first half of FY22, the ASX growth share’s revenue rose by 48.3%, while gross profit increased 50.5% and net profit after tax (NPAT) jumped 70.3%. Lovisa said it has a strong focus on efficiencies while building structure to support the next stage of growth.

Growth has continued into the second half of FY22. Comparable store sales were up 12.1% in the first eight weeks of the second half, but total sales were up 61.7%.

The Lovisa share price closed is currently $14.97, 25% lower than it started the year.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is a retailer that describes its purpose as to support new and expectant parents in the early years of parenthood.

The company has more than 60 stores. It is aiming for at least 100 stores in Australia and at least 10 stores in New Zealand. In the first half of FY22, it opened four new stores.

Baby Bunting sees private label and exclusive products as a way to attract customers as well as achieve a higher gross profit margin. In the first half of FY22, private label and exclusive products made up 44.5% of total sales.

Online sales are also responsible for a long and growing number of sales. First-half online sales increased by 32.6% to $56.8 million, accounting for 23.8% of total sales.

The company continued to grow and achieve operating leverage. Total sales increased 10%, gross profit increased 15.6%, and pro forma net profit after tax rose by 16.5% to $12.5 million. Its market share continues to grow, according to the company. The company also recently opened a new national distribution centre, helping it with costs and becoming more efficient.

The ASX growth share said it is assessing the broader $5.1 billion baby goods market “for future long-term growth opportunities”. It is also investing in its online offering and expanding its online range. It’s also reviewing its network plan to assess opportunities “given its sustained market share growth”.

Using the last two declared dividends, Baby Bunting has a trailing grossed-up dividend yield of 5.2%.

At the time of writing, the Baby Bunting share price is $4.13, 26% lower than at the start of 2022.

The post Are these 2 top ASX growth shares buys right now? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy next week
• What’s pushing the Lovisa share price higher on Thursday?
• 3 stellar ASX growth shares analysts are tipping as buys this month
• 2 excellent ASX shares to buy and hold for a decade
• Here are 2 top ASX dividend shares analysts are tipping as buys

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 Baby Bunting and Lovisa Holdings 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 Bitcoin (CRYPTO: BTC) price cratered over the past 24 hours, sinking 10%.

The world’s biggest crypto by market cap is currently worth US$30,732 (AU$44,048), having dipped as low as US$30,516 overnight.

Why the selloff?

The latest selloff puts the Bitcoin price down 35% since 1 January. It’s now down 55% from the all-time highs hit on 10 November last year, when the token reached US$68,790.

The rout comes following another brutal day on US markets, which saw the tech-heavy Nasdaq close down 4.3%.

In a further demonstration that cryptos are trending in lockstep with risk assets like high-growth tech shares, every one of the top-100 cryptos (save the stablecoins) is deep into the red today, according to data from CoinMarketCap.

What the experts are saying about the Bitcoin price

Commenting on the sliding Bitcoin price, head of derivatives at Genesis Global Trading Josh Lim said (as quoted by Bloomberg):

We’re seeing a slow motion meltdown, partially because it’s mostly been long holders selling [instead of levered liquidations]. Now that some corporate treasuries are hovering near their cost basis, markets are waiting and watching to see if shareholders will force some de-risking.

CEO of Galaxy Digital Holdings Michael Novogratz added:

Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium. My instinct is there’s some more damage to be done, and that will trade in a very choppy, volatile and difficult market for at least the next few quarters before people are getting some sense that we’re at an equilibrium.

Senior research analyst at Cumberland DRW Steven Goulden is among those who’ll be vigilantly watching the upcoming Bitcoin price moves (from Bloomberg):

We’re watching carefully to see how the market fares over the next 24 hours. Including whether mechanisms being introduced to help increase reliance, such as LFG lending out Bitcoin to OTC trading firms, will be enough to hold in times of deep stress or if we need additional stabilisation mechanisms.

CEO of Mudrex Edul Patel believes that with investors nervous about fast-rising interest rates, the Bitcoin price could have further to slide, potentially below US$30,000.

“The downward trend is likely to continue for the next few days,” he said.

The post ‘Slow motion meltdown’: How low will the Bitcoin price sink? appeared first on The Motley Fool Australia.

More reading

• Bitcoin just fell 10% in a day: Time to strike?
• First-ever Aussie Bitcoin and Ethereum ETFs finally launch this week
• Bitcoin price slumps to 4-month lows. Now what?
• Bitcoin price plunges 11%. What’s going on?
• Here’s why the Bitcoin price surged 6% overnight

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. 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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Australia’s economic position has experienced a notable shift over last few weeks and the nation’s stock market appears to have shifted in turn. Understandably, many of those invested in ASX shares are likely worried the recent downturn could spell a stock market crash.

Rest assured, the ASX doesn’t appear to be ‘crashing’ right now. Though, it’s not off the cards.

Let’s look at what a stock market crash is and how far away the ASX might be from experiencing one.

Is this the beginning of an ASX stock market crash?

The exact definition of a stock market crash is subjective. Though, the consensus appears to be that ASX shares must tumble more than 20% over a short period of time for a stock market crash to be declared.

While the market has displayed plenty of volatility this year, it hasn’t quite reached ‘crash’ levels.

The ASX experienced a correction earlier this year. The S&P/ASX 200 Index (ASX: XJO) dropped 9.9% between 4 January and 27 January ­– a plunge lasting slightly more than three weeks.

The tumble came amid concerns of rising inflation and resulting interest rate hikes – fears which have recently been realised.

Australia saw the inflation rate surpass 5% late last month and the Reserve Bank of Australia increased interest rates for the first time in more than a decade last week.

However, the ASX 200 is currently only 8.43% lower than the near-all-time high it reached on 21 April.

Worryingly, it’s not such a pretty picture overseas. As many market watchers will know, ASX shares tend to move in line with their US-based counterparts – and those counterparts are struggling.

The S&P 500 (SP: .INX) is now nearly 14% lower than its March high. Its latest tumble appears to have been driven by the US Federal Reserve’s recent decision to hike interest rates once more.

Meanwhile, the Nasdaq Composite (NASDAQ: .IXIC) is now officially in stock market crash territory. It’s plummeted 20.5% from the high it recorded six weeks ago.

The tech-heavy index fell more than 4% while most of Australia slept through the US’s Monday session.

Perhaps in reaction, the ASX 200 is in the red on Tuesday, slumping 1.9% at the time of writing. But not all is lost.

Here at The Motley Fool Australia, we like to take a ‘glass half full’ approach.

As our chief investment officer Scott Phillips said during January’s correction: “The ASX has never yet failed to regain, and then surpass, its previous highs … I have a high degree of confidence that history will be a good guide.”

The post ASX shares are tumbling, but is it an actual stock market crash? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX shares today
• ‘Do not panic’: Experts explain how to stay calm and carry on investing amid rising interest rates
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Macquarie share price tumbles 4% to 9-week low. Is it time to pounce?

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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The small side of the market has been a difficult place to invest this year. Due to a sudden disdain for loss-making tech shares, the market has punished a number of highly promising small cap shares.

While this is disappointing, it could be an opportunity for patient, long-term focused investors.

Here are two small cap ASX shares that brokers rate as buys and are forecasting huge growth in the future:

Hipages Group Holdings Ltd (ASX: HPG)

The first ASX small cap share to look at is Hipages. It is a leading online platform provider that provides job leads to tradies from homeowners and organisations looking for qualified professionals.

In addition, the company’s Tradiecore software helps tradies with job management, understanding profitability, and to create a smoother experience for both them and their customers.

Goldman Sachs is a very big fan of Hipages and believes it has enormous potential. In fact, the broker has likened the company to Carsales.com Ltd (ASX: CAR) and REA Group Limited (ASX: REA) in the early days.

The broker commented: “In our view, the opportunity for HPG is similar to REA/CAR, which are now the leading online platforms in their respective industries. […] HPG presents a compelling long term growth opportunity as it scales to become the leading trade services marketplace in Australia.”

The broker currently has a buy rating and $2.50 price target on its shares.

Nitro Software Ltd (ASX: NTO)

Another small cap that is highly rated is Nitro Software. It is the document productivity software company behind the Nitro Productivity Suite that is driving digital transformation in organisations around the world.

Bell Potter is very positive on Nitro. It currently has a buy rating and $2.50 price target on its shares.

It said: “[Nitro] Remains a key pick despite not reporting last month but looking value for a high quality, mid cap tech stock on FY22 EV/EBITDA and PE ratios of c.22x and 40x and we also expect a good 1HFY22 result in May with, in particular, strong SaaS ARR growth.”

The post 2 highly rated small cap ASX shares that analysts say have huge potential appeared first on The Motley Fool Australia.

More reading

• Analysts say investors should buy these top ASX shares
• Why Nitro, PointsBet, Sezzle, and Siteminder shares are racing higher
• Nitro share price storms 23% higher on record quarter
• Analysts name 3 small cap ASX shares to buy
• Goldman Sachs says these small cap ASX shares can double in value

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 Hipages Group Holdings Ltd. The Motley Fool Australia has positions in and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has recommended Nitro Software 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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Bank shares on the S&P/ASX 200 Index (ASX: XJO) delivered a decent set of profit results this month, but investors shouldn’t bank on more good times ahead, according to experts.

The sombre outlook comes as the big four ASX banks delivered a 5.1% increase in operating cash profit to $14.4 billion, according to KPMG’s analysis that was reported in The Australian.

ASX 200 bank shares deliver earnings bounce

This should be great news for the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price, National Australia Bank Ltd (ASX: NAB) share price and Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price.

After all, their profit growth puts them at just 0.4% below their pre-COVID-19 earnings. The growth in their latest half-year results is a function of continued strong demand for both residential and business loans.

The value of mortgages improved 2.5% to $1,812 billion, although business lending growth is the highlight as that expanded 4.8% to $1,077 billion, reported The Australian.

Why the good times for banks are under threat

This isn’t the time for investors in ASX 200 bank shares to get complacent though. It’s like the fine print you see in financial services ads: past performance shouldn’t be used as a guide for future performance.

That’s the verdict by analysts quoted in the article. KPMG’s head of banking Steve Jackson warned, “with uncertainty ahead, it will be interesting to see how they maintain their current momentum’’.

Cost savings lever is harder to pull

Further, ASX 200 bank shares have limited ability to leverage on cost savings, according to KPMG and EY. Cost-cutting is one of the key features of Westpac’s bullish profit results released yesterday.

This is because bank margins will continue to be squeezed by the jump in inflation and intense competition from non-bank lenders.

EY’s banking and capital markets leader, Tim Dring, believes that margin headwinds will continue into the second half of the year. But the outlook is brighter because of the RBA’s recent larger-than-expected cash rate rise.

Rising interest rates are a double-edged sword

“While margin compression is likely to continue in the short term, the rising interest rate cycle should ease NIM [net interest margin] pressures and lead to improved profitability for the banks over the medium term,’’ Dring said.

“However, ongoing economic risks point to continued uncertainty for the banking sector’s outlook.”

Rising interest rates are a double-edged sword for ASX 200 bank shares. While it will enable banks to charge more for loans, it also could lead to a deterioration in asset quality and slow loan growth.

ASX 200 bank shares running out of growth options

The positive assessment of the banks’ results was echoed by PwC Australia, which noted they delivered the “cleanest result in years”. But PwC too warned that the momentum could fade.

While there was a general absence of significant one-off charges, such as write-downs and restructuring costs, as banks streamlined and downsized, growth will be harder to come by due to the simplification strategy.

The post What’s the outlook for ASX 200 bank shares amid rising interest rates? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking Corporation. 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 Westpac Banking Corporation. 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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