Tag: Motley Fool

The Kogan.com Ltd (ASX: KGN) share price has fallen by 36% since the start of 2022.

It has fallen even further looking at longer periods of time. In the last six months the Kogan share price has fallen by 49%.

In 2020 the business was one of the economic winners of 2020 with a huge boom of e-commerce sales.

But since then, it has been a story of much lower profitability for the company as excess inventory led to higher warehousing costs, more product discounting and more spending on marketing.

The e-commerce business released its FY22 half-year result in February, with the company outlining various parts of its performance.

Here are some of the highlights if readers didn’t see it:

Kogan’s HY22 result

Gross sales increased 9.4% to $698 million, but the gross profit fell by 8.1% to $108.1 million. It made an earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $2 million (down from a $38.8 million EBITDA profit in HY21). Adjusted EBITDA plunged 66.4%, whilst adjusted net profit after (NPAT) sank 85.6% to $4.8 million.

It reported a statutory net loss of $11.9 million, down from a profit of $23.6 million.

The company blamed impacts from supply chain interruptions as a result of the COVID-19 situation and changes in customer demand. Investors may have punished the Kogan share price because of these impacts.

Kogan.com’s active customers grew 10.4% year on year to 3.31 million at 31 December 2021. Mighty Ape had 757,000 active customers on 31 December 2021.

A key part of the company’s long-term plans is to grow its membership program, as Kogan First members demonstrate stronger loyalty and repeat purchase behaviour compared to non-subscribers. Kogan First members grew 176.4% year on year to over 274,000 subscribers at 31 December 2021. It had reached 310,000 Kogan First subscribers in February 2022.

Long-term growth plans

The Kogan share price has been very volatile in the last two years.

However, the company says that online retail is in its infancy in Australia. Kogan’s market share is growing in the e-commerce market that continues to rapidly increase in size. Kogan’s market share was 2.4% in FY20 and 2.7% in FY21.

Over the next five years, the company is aiming to achieve 1,000,000 Kogan First members and grow gross sales at a compound annual growth rate of at least 20% to reach $3 billion of gross sales in FY26.

Looking at the shorter term, in the second half of FY22 Kogan is expecting more growth of Kogan First subscriptions, continued growth of Kogan Marketplace (which is where third parties sell products on Kogan.com), growth of Mighty Ape and improved operating leverage.

Is the Kogan share price an opportunity?

Kogan shares have been falling in recent months.

Investors have turned sour on the business. For example, Credit Suisse recently decreased its rating on the business from a buy/outperform to ‘neutral’ because the half-year result wasn’t as good as the broker was expecting, with expectations of higher advertising, lower sales and weaker-than-expected margins.

UBS also rates the business as ‘neutral’. It’s expecting that investors will need to be patient for a recovery in profitability as Kogan continues to invest in growing the business.

On UBS’ numbers, the Kogan share price is valued at 39x FY23’s estimated earnings.

The post Down 36% in 2022, should investors jump on the Kogan (ASX:KGN) share price? appeared first on The Motley Fool Australia.

More reading

• What’s the outlook for ASX retail shares like Kogan (ASX:KGN)?
• These are the 10 most shorted ASX shares
• Why Blackmores, BWX, Kogan, and Magellan shares are dropping
• Why is the Kogan (ASX:KGN) share price crashing 20% on Friday?
• Kogan (ASX:KGN) share price in limbo amid $11.9m first half loss

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. owns and has recommended Kogan.com ltd. The Motley Fool Australia owns and has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

The Blackmores Limited (ASX: BKL) share price is trading lower on Monday morning.

At the time of writing, the health supplements company’s shares are down over 1.5% to $76.62.

Why is the Blackmores share price falling?

Investors have been selling down the Blackmores share price on Monday following the release of a broker note out of Goldman Sachs.

According to the note, the broker has downgraded the company’s shares to a sell rating with a $75.20 price target.

This suggests potential downside of approximately 2% from where the Blackmores share price is trading right now. This compares to the broker’s coverage average of +27%.

Why did Goldman downgrade its shares?

Goldman was pleased with Blackmores’ performance during the first half and notes that management is “executing well against its strategic plan.”

However, this is coming at a cost, with the company spending heavily to rebuild its brand in existing markets and launch into new markets. In light of this, it suspects that the company’s earnings will be under pressure in the near term.

Goldman said: “BKL is delivering in line with its strategy, on track for A$55mn in annualised cost savings by FY23 as a result of operational efficiency. It is investing in growth markets and prioritizing new product innovation and digital. Near-term outlook remains mixed: we expect diversification of geographic and channel footprint to benefit the International business and the China business should grow in line with the channel underpinned by targeted investments in China e-commerce. Expansion into new markets (i.e. India) will impact margins in the near-term, albeit we expect BKL to execute in a measured manner.”

“Despite the strategy broadly on track, we downgrade our rating to Sell, with higher near-term reinvestments resulting in a subdued earnings environment,” the broker concluded.

The post Why this broker just downgraded Blackmores (ASX:BKL) shares to a sell rating appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Top broker gives its verdict on the Blackmores (ASX:BKL) share price
• Top brokers name 3 ASX shares to sell next week
• Why is the Blackmores (ASX:BKL) share price tumbling another 10% today?
• Why Blackmores, BWX, Kogan, and Magellan shares are dropping

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 Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3Zy0eCQ

The Appen Ltd (ASX: APX) share price is in the red in early trade.

Appen shares closed flat on Friday at $7.09 per share and are currently trading for $6.91, down 2.5%.

Below we look at the ASX 200 tech share’s investment announcement that looks to be spurring investor interest.

What investment was announced?

The Appen share price is sliding after the company reported its minority investment of 2 million pounds (AU$3.6 million) in Mindtech Global Limited. In line with its investment, Appen has formed a commercial partnership agreement with Mindtech.

Mindtech, the creator of Chameleon, specialises in developing training data for AI computer vision models.

Commenting on the investment, Appen’s CEO, Mark Brayan said:

Mindtech has created a scalable platform for the generation of large-volumes of synthetic training data. The partnership between Appen and Mindtech will provide customers with the ability to curate a combination of real-world and synthetic data across a wide variety of use cases.

The allocation of capital to a new and disruptive product-led business enables Appen to bring new solutions to our customers and evolve with market trends.

If you’re unfamiliar with synthetic data, Appen explains it’s an “emerging component of the training data market that is used to augment real-world data. It is particularly useful for the creation of edge-case data that is difficult to capture”.

The company reports that the synthetic data market segment is forecast to grow to $1.15 billion by 2027. That’s a compound annual growth rate of 48%.

As part of the investment agreement, Brayan will join the Mindtech Board.

The Appen share price may have failed to get a lift today after the company said it did not expect a material revenue impact from the partnership in 2022, “given the early stage of the synthetic data market”.

Appen share price snapshot

It’s been a difficult run for the Appen share price since hitting all time highs of $40.08 on 21 August 2020.

And 2022 has been little exception.

The Appen share price is down 39% since the opening bell on 4 January. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 6.4% in that same period.

The post Appen (ASX:APX) share price fails to lift off on strategic investment appeared first on The Motley Fool Australia.

More reading

• These were the worst performing ASX 200 shares in February
• Leading brokers name 3 ASX shares to buy today
• Embattled Appen (ASX:APX) share price bounces despite a top broker downgrade
• Top brokers name 3 ASX shares to sell next week
• These were the worst performing ASX 200 shares last week

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Appen Ltd. The Motley Fool Australia owns and has recommended Appen Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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

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

As technology continues to rapidly evolve, demand is soaring for providers of advanced services like machine learning (ML). It’s a subfield of artificial intelligence that focuses on using large amounts of data to make predictions and improve productivity in a variety of business processes. 

Estimates suggest the machine learning industry was worth $15.5 billion in 2021, and it’s set to soar almost tenfold to $152 billion by the year 2028. That growth will be driven by organizations finding new and exciting ways to apply ML, whether they’re in e-commerce, manufacturing, or anything in between.

Splunk (NASDAQ: SPLK) is a pioneer of ML technology. It just reported its full-year fiscal 2022 earnings results, and it beat even its own forecasts. Here’s why the company could be perfectly positioned to grab an increasing slice of this booming industry.

Diverse use cases

Splunk offers a variety of solutions across security, information technology, and development operations — with machine learning woven through them all. Each solution has a subset of use cases, but the diversity of Splunk’s capabilities is more observable through its customer base, which now consists of 92 of the Fortune 100 organizations.

Global car maker Honda Motor has deployed Splunk in its Alabama plant, which is the company’s largest light-truck manufacturing facility in the world. Splunk’s predictive insights are adding value by constantly analyzing machine data to catch critical failures, reducing the plant’s time-to-repair metric by 70%. Splunk is even monitoring air quality inside the facility, to ensure emissions from paint-related production activities don’t exceed regulatory limits, preventing costly shutdowns.

Then there’s Domino’s Pizza, which couldn’t be a more different business than Honda. Domino’s now leverages over 15 different sales channels, from a smart TV application, to mobile, to smart speakers, and it uses Splunk to monitor them all. Splunk offers real-time insights into each transaction so Domino’s can make improvements on the fly, and like Honda, the pizza maker is able to proactively minimize the effects of incidents and downtime.

But there’s perhaps no higher-stakes deployment of Splunk’s technology than in Formula 1 racing, where the McLaren team uses machine learning and predictive analytics to make real-time changes to its cars in a live setting.

A transformative fiscal 2022

Splunk is in the middle of a major transition to the cloud, which allows the company to deliver its solutions more effectively. By the same token, it allows customers to operate Splunk’s applications anywhere, anytime, which is especially important when deploying Splunk’s security solutions.

Cloud revenue now represents 35% of total revenue, and it’s the driving force behind Splunk’s growth at the moment.

Metric	Fiscal 2021	Fiscal 2022	Change
Cloud revenue	$554 million	$943 million	70%
Total revenue	$2.22 billion	$2.67 billion	19%

Data source: Splunk. CAGR = Compound Annual Growth Rate.

The company’s total fiscal 2022 revenue of $2.67 billion beat the upper end of its most recent forecast of $2.56 billion, and it reported $128 million in operating cash flow, which was a 28% boost over its $100 million estimate.

Splunk is attracting more large organizations. It reported 675 customers in its top category, who spend $1 million or more annually. It represented 32% year-over-year growth in fiscal 2022, but that includes 317 cloud customers, and that number was up 70% for the year.

Splunk is a bet on the future

The case for owning Splunk stock isn’t built on a single good year. As mentioned earlier, the machine learning industry could be worth $152 billion annually by 2028, and that represents a compound annual growth rate of 38.6% between now and then.

But Splunk’s cloud-based revenue grew at almost twice that rate in fiscal 2022, suggesting it’s set up to increase its market share in the future, as cloud becomes the dominant share of its business. And the company is forecasting up to $2 billion in cloud annual recurring revenue in fiscal 2023, which would be a 49% jump over the $1.34 billion in fiscal 2022.

A new CEO also just joined the fold, bringing a plethora of experience in software-as-a-service (SaaS) businesses across the cybersecurity industry, and this addition should help drive Splunk’s recurring revenue business model forward. 

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

The post This growth stock is a machine learning powerhouse appeared first on The Motley Fool Australia.

More reading

• The IAG (ASX:IAG) share price managed to gain 8% in February. Here’s how
• Up 20% this year, what is the outlook for the BHP (ASX:BHP) share price?
• AGL (ASX:AGL) share price on watch amid improved takeover offer
• These ASX 200 shares are being dumped out of the index and replaced with…
• Here’s why the Xero (ASX:XRO) share price is a top buy right now: expert

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Domino’s Pizza. 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 Bruce Jackson.

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/kBSCHzd

The Insurance Australia Group Ltd (ASX: IAG) share price performed strongly in February, gaining 8.49%.

For comparison, the S&P/ASX 200 Index (ASX: XJO) gained just 1.11% over the same period.

As of the final close of February, the IAG share price was $4.60.

Let’s take a closer look at how the insurer’s stock performed last month.

What boosted the IAG share price in February?

The IAG share price gained 4.18% on the release of the company’s results for the first half of financial year 2022.

The gain came despite the company reporting a 4.4% decrease in revenue – coming to around $9.2 billion – and a 62% decrease in cash earnings – falling to $176 million.

That likely resulted in IAG’s decision to cut its dividend to 6 cents per share – a 14.3% drop.

However, the insurer showed confidence in its future performance, upgrading its guidance on gross written premium growth from low single-digit growth to mid-single digit growth.

It also stuck by its insurance margin guidance of between 10% and 12%.

There was more good news from the company later that month.

On 22 February, it released news of a favourable appeal judgement handed down by the Full Court of the Federal Court of Australia regarding business interruption insurance policies.

The Full Court agreed with previous conclusions that generally found that business interruption policies weren’t intended to provide coverage for pandemic-related losses.

Unfortunately, the IAG share price ended the month with a sizeable tumble.

It slipped 6.5% over the final 3 sessions of February despite the company’s silence. Though, the drop coincided with major flooding in south-east Queensland and northern New South Wales.

Since the end of last month, the IAG share price has slipped to trade at $4.45.

That’s 0.2% lower than it was at the start of 2022. It is also 7.4% lower than it was this time last year.

The post The IAG (ASX:IAG) share price managed to gain 8% in February. Here’s how appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell next week
• ‘$2 billion cost’: How are the floods impacting ASX 200 insurance shares this week?
• IAG (ASX:IAG) share price slumps amid $300m Greensill hit
• Why is the IAG (ASX:IAG) share price sliding this week?
• 4 ASX shares that love rising interest rates: report

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 owns and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/YLx1TOZ

The BHP Group Ltd (ASX: BHP) share price has outperformed the S&P/ASX 200 Index (ASX: XJO) since the start of 2022.

In the year to date, BHP shares have risen by 18% whilst the ASX 200 has actually fallen by 6%.

After outperformance of more than 20% in the first couple of months in 2022, what’s next for the resources giant?

Plans for growth

BHP is one of the largest businesses in the world with a market capitalisation of $253 billion according to the ASX.

However, the company’s management is now looking at growth options for the business.

The last decade has included some significant divestments by BHP. For example, it divested South32 Ltd (ASX: S32) and it is on track to merge the petroleum segment with Woodside Petroleum Limited (ASX: WPL).

Once that divestment happens, that will leave the business with the following exposures: iron ore, coal, copper, nickel and potash.

The boss of BHP, Mike Henry, has spoken to the Australian Financial Review about the company’s plans. He said:

One of the objectives I have is to create and secure more options for growth in future-facing commodities, which we’ve said are copper, nickel and potash.

As the world progresses on decarbonisation and electrification, it’s going to need more copper and nickel.

There’s a huge opportunity ahead for Australia in resources. You only have to think about where we sit geographically.

You’ve got billions of people in broader Asia and South-East Asia, all seeking a higher standard of living where we’re going to see growth for decades to come. Australia is at the centre of all of that and able to help make some of that happen.

Different resources will play a key part

Whilst iron ore has been a very important commodity for Australia’s resources boom over the last decade (and have helped the BHP share price), it could be other materials that grow in importance over the next decade.

Mr Henry said that Australia is going to have to work harder to stay competitive and take advantage of the global demand for some of the commodities that it offers.

Australia isn’t a world leader in copper, nickel or potash. But it is doing well with lithium for electric vehicles and other types of energy storage.

One suggestion for Australia was that it can increase funding to support smaller-sized businesses that can help with exploration, cybersecurity and new technologies for mining according to the AFR. Those businesses could then expand globally and/or into other sectors.

Higher performance?

Mr Henry is aiming for growing value for shareholders.

How can BHP achieve that? It can be done with “sustained operational excellence” which can produce both financial returns and allows management to focus on growing the business in other areas.

The company is going to be pursuing those future-focused commodities like copper, nickel and potash. BHP is working on removing its whole thermal coal business, as well as a lot of its metallurgical coal business.

BHP share price target from brokers

UBS rates BHP shares as ‘neutral’, though the price target is only $42 on expectations of lower resources prices over the next year or two. It also thinks BHP will have to start choosing between investing for growth and paying big cash payments to investors.

However, Macquarie currently rates BHP as a buy with a price target of $53 thanks to the current strong environment for commodities.

The post Up 20% this year, what is the outlook for the BHP (ASX:BHP) share price? appeared first on The Motley Fool Australia.

More reading

• Why is the iron ore price hitting 6-month highs?
• ASX 200 dives to 4-day low following Ukraine nuclear power plant crisis
• Why BHP (ASX:BHP) is ‘having its time in the sun’: expert
• ‘Hope for the best and plan for the worst’: BHP boss
• Here’s how these top 3 ASX 200 mining shares performed in February

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

from The Motley Fool Australia https://ift.tt/8RxAJgN

The AGL Energy Limited (ASX: AGL) share price will be one to watch on Monday.

This follows the release of a takeover update exactly two weeks after the last.

Why is the AGL share price on watch?

As readers might recall, two weeks ago AGL received a takeover offer from a consortium led by Brookfield Asset Management and Atlassian co-founder Mike Cannon-Brookes’ private investment firm, Grok Ventures.

The parties, collectively known as the Brookfield Consortium, made a non-binding offer of $7.50 per share, which was swiftly rejected by the energy giant.

This morning AGL revealed that the Brookfield Consortium has returned with an improved offer.

According to the release, the consortium has made a revised unsolicited, preliminary, non-binding offer to acquire 100% of the shares in AGL Energy for $8.25 per share by way of a scheme of arrangement. This represents a 10% increase on its previous offer and an 11% premium to the current AGL share price.

However, this is still not enough to tempt the AGL Board. It has just as quickly rejected the new offer on the grounds that it is still well below both the fair value of the company on a change of control basis and relative to the expected value of the proposed demerger.

Why was it rejected?

AGL’s Chairman, Peter Botten, explained why the Board has rejected this latest offer.

He said: “The Revised Unsolicited Proposal continues to ignore the opportunity that AGL Energy shareholders have through our proposed demerger to realise potential future value. It also ignores the momentum we have recently seen in the business through our solid half year result, strong progress on the demerger, strong interest in our Energy Transition Investment Partnership and the improvements we are seeing in forward wholesale prices.”

“The proposed demerger will be a catalyst for the potential realisation of shareholder value. It will create two industry leading companies with distinct value propositions. It will allow each business to be valued separately and more positively by the market on the basis of their own specific business fundamentals. We have defined distinct dividend policies and capital structures for each company that will support both future growth and appropriate returns to shareholders, as both organisations pursue their commitment to responsibly decarbonise without impacting energy reliability and affordability,” he concludes.

The post AGL (ASX:AGL) share price on watch amid improved takeover offer appeared first on The Motley Fool Australia.

More reading

• Will Mike Cannon-Brookes bring an extra $1 billion to the table in his AGL takeover bid?
• Why did AGL (ASX:AGL) shares smash Origin in February?
• Shareholder calls out AGL (ASX:AGL) planned demerger as ‘value destructive’
• These 5 ASX 200 shares are trading ex-dividend today
• Here’s why Mike Cannon-Brookes isn’t giving up on AGL (ASX:AGL)

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/5iYNLs3

S&P Dow Jones Indices has just announced changes to the S&P/ASX 200 Index (ASX: XJO).

These changes are for the March quarterly rebalance, that will take place at the commencement of trade on 22 March.

ASX 200 exits

A total of four ASX 200 shares will be kicked out of the index later this month.

These are struggling biotechnology company Mesoblast limited (ASX: MSB), casino and resorts operator SKYCITY Entertainment Group Limited (ASX: SKC), New Zealand telco Spark New Zealand Ltd (ASX: SPK), and shopping centre operator Unibail-Rodamco-Westfield (ASX: URW).

This could be bad news for these shares, as when a company is removed from the ASX 200, it can lead to an increase in selling. This is because index funds that track the ASX 200 will need to sell these shares in order to reflect the changes.

In addition, some fund managers have mandates that mean they are only allowed to own shares that are included in certain indices. With these shares now dumped out of the benchmark index, they could soon be dumped out of portfolios of fund managers that are only allowed to own shares included in the ASX 200.

ASX 200 additions

Replacing these shares in the benchmark index on 22 March will be lithium exploration company AVZ Minerals Ltd (ASX: AVZ), plus sized fashion retailer City Chic Collective Ltd (ASX: CCX), gold explorer De Grey Mining Limited (ASX: DEG), and property company Home Consortium Ltd (ASX: HMC).

Their inclusion in the index could have a positive effect on their respective share prices for the same reasons mentioned above, but in reverse. Fund managers (with ASX 200-only mandates) that have wanted to own these shares will soon be able to, and index funds tracking the ASX 200 will have to purchase shares as part of the rebalance.

The post These ASX 200 shares are being dumped out of the index and replaced with… appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• These were the worst performing ASX 200 shares last week
• Here are 4 ASX shares insiders are putting their money behind
• These are the 10 most shorted ASX shares
• Is now the time to buy these 2 beaten-up ASX shares in March 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 Bruce Jackson.

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

The Xero Limited (ASX: XRO) share price could represent a top investment opportunity at the moment.

For readers that aren’t aware, Xero is a cloud accounting software business that aims to provide beautiful accounting to users.

There are many different users in the ecosystem including business owners, accountants, bookkeepers, advisors and employees.

It aims to make things easy to understand, simple to use, efficient and increasingly automated.

This offer is resonating with customers and that’s one of the first reasons why the Xero share price could be a smart idea:

Subscriber growth

Xero has come a long way over the last decade. Its cloud-only software has won over millions of subscribers. In the FY22 half-half-year result, Xero revealed its total subscribers had reached 3 million, up 23% year on year.

It now has a very strong position in New Zealand and Australia. But the company is growing quickly in several other countries too like the UK, South Africa and Singapore.

The company recently made an acquisition (called TaxCycle) in Canada that has quickly ramped up its presence in the country, which has a materially bigger population than Australia.

Strong metrics

One of the factors that may be helping the Xero share price is a number of its strong metrics.

It has a very high gross profit margin (over 87% and rising), which allows the business to re-invest a high proportion of its new revenue into more growth investing. Management is indeed prioritising spending growth over generating a big net profit at this stage.

The average revenue per user (ARPU) increased by 5% to $31.32 in HY22. Churn also remains very low.

The above factors helped the annualised monthly recurring revenue (AMRR) increase by 29% to $1.13 billion in HY22. Xero’s lifetime value of subscribers increased 61% to $9.94 billion.

Growing ecosystem

Xero wants to be the leading global platform for smaller and medium businesses around the world.

For a long time, the company has provided a very powerful accounting and business management system for business owners and accountants. But it has also allowed external software developers to provide support and technology for businesses with extra analysis, unique inventory management tools and so on. There are lots of different options.

Xero has also been acquiring businesses to expand its offering. Recent acquisitions include: Planday, Tickstar and Waddle.

Xero share price target

Morgan Stanley rates the business as a buy, with a price target of $137. That’s approximately 40% higher than where it is today.

The post Here’s why the Xero (ASX:XRO) share price is a top buy right now: expert appeared first on The Motley Fool Australia.

More reading

• Goldman says the tech selloff has made Xero (ASX:XRO) shares a buy
• 5 things to watch on the ASX 200 on Friday
• 3 ASX tech shares going gangbusters today
• 2 top ASX growth shares that have been heavily sold off
• Analysts see huge upside potential for these beaten down ASX tech shares

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. owns and has recommended Xero. The Motley Fool Australia owns and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/K0mAsl3

A little-known ASX stock that represents a supplier for the ubiquitous Chemist Warehouse chain is set to zoom ahead this year.

That’s the opinion of Prime Value portfolio manager Shih Thin Wong, who said that in turbulent times such as now, businesses with resilient demand would win.

“I want to be comfortable owning companies which I think will give me earnings growth profile regardless of the macro environment,” he told Switzer TV Investing. 

“And can control a number of elements that will drive growth internally… And I want to be owning companies that are less reliant on what’s happening in the global financial markets.”

We’ll continue to buy regardless of economy

One ASX share that fits all those criteria is New Zealand’s EBOS Group Ltd (ASX: EBO), according to Wong.

“It’s not a company which is really followed by Australian fund managers that closely. But it’s a hidden gem in the mid-cap space.”

Wong notes that one of EBOS’ clients is a huge retailer that all Australians will have shopped at one time or another. 

“It really is a key supplier to Chemist Warehouse, which we know is growing very strongly. So there’s growth in that pipeline.”

In times of rising interest rates and wars, pharmacy and medical supplies industries are known to be robust.

“We’re comfortable that it’s got 8% to 12% earnings growth in the next 2 to 3 years,” said Wong.

“We will continue to buy pharmacy products whether the economy is good or bad.”

There is also an acquisition that EBOS will settle in the coming 24 months, which will bring it earnings growth, according to Wong.

“The management of this company is really strong.”

EBOS, which is dual-listed on the NZX and ASX, has a market capitalisation of $6.9 billion. 

Its ASX shares have lost about 7% for the year so far, closing Friday at $36.05.

According to CMC Markets, 6 out of 10 analysts currently rate the stock as a “buy”. Five of them consider it as a “strong buy”.

The post Why this $7 billion ASX-listed company is a ‘hidden gem’: expert appeared first on The Motley Fool Australia.

More reading

• Analyst tips 20% upside and 6.5% dividend yield for this ASX share
• 5 things to watch on the ASX 200 on Monday
• Analysts name 2 ASX 200 dividend giants to buy in March
• 2 ASX shares rated as strong buys by brokers
• 3 buy-rated ASX growth shares analysts are recommending

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/lVUOzB7