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The REA Group Limited (ASX: REA) share price is on the move on Friday following the release of its half year results.

At the time of writing, the property listings company’s shares are up 3% to $147.45

REA share price higher on strong half year growth

• Revenue up 37% over the prior corresponding period to $590 million
• EBITDA up 27% to $368 million and ahead of market consensus estimate of $350 million
• Net profit and earnings per share up 31% to $226 million and 171 cents
• Interim dividend increased 27% to 75 cents per share
• 12.6 million unique realestate.com.au visits each month on average

What happened in the first half?

For the six months ended 31 December, REA delivered a 37% increase in revenue to $590 million and a 31% jump in net profit to $226 million. This was broadly in line with Goldman Sachs’ above-consensus estimates of revenue of $591.6 million and profit of $227 million.

This strong growth was underpinned by growth across all its major lines, including a 31% increase in the Australian Residential business. Management advised that this reflects a strong market recovery despite the impact of Melbourne and Sydney lockdowns in the first quarter.

Supporting its growth were record-breaking visitor numbers to the realestate.com.au website. During the period an average of 12.6 million people visited each month, with a record 13.2 million in October. The latter is the equivalent of 65% of Australia’s adult population. On average, there are 3.3x more visits than the nearest competitor each month.

REA reported a 17% increase in core operating costs, excluding acquisitions, during the half. This was driven by reduced operating costs in the prior period as it navigated through COVID uncertainty, continued investment to deliver strategic initiatives, and higher salaries in a tight labour market. Management also advised that strong growth in add-ons such as Audience Maximiser has driven an increase in variable costs related to these products.

Management commentary

REA’s Chief Executive Officer, Owen Wilson, was deservedly pleased with the half.

He commented: “REA Group delivered an exceptional first half result as the business continued to successfully navigate the impacts of the global pandemic. As anticipated, the removal of COVID restrictions saw a wave of new listings on realestate.com.au, with sellers making up for the time lost in lockdown and taking advantage of the significant buyer demand. Combined with record take up of our premium listing products in Residential and Commercial, we delivered very pleasing revenue growth.”

“Our flagship site realestate.com.au continued its position as the number one address in property. In October, a record of 145.5 million visits to realestate.com.au were achieved and the site has grown to be Australia’s seventh largest online brand,” he added.

Outlook

The second half has started strongly for REA. Management notes that national new listings were up 14% year on year thanks to 19% growth in Sydney and 5% growth in Melbourne.

However, no real guidance has been given for the full year. Though, management has revealed that it is targeting full year positive operating jaws, excluding acquisitions.

It also advised that it expects full year operating cost growth of low-double digits, up from high-single digits previously anticipated. This primarily reflects an increase in revenue-related variable costs.

“REA Group has emerged from another disruptive year in excellent shape, and we expect the favourable market conditions to continue into 2022. While COVID and the federal election may throw some curveballs, the effect on our market should be temporary. We are excited about new products scheduled to enter the market this year as well as the excellent progress we have made with our adjacent businesses,” said Mr Wilson.

The post REA (ASX:REA) share price higher after smashing first half expectations appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Top brokers name 3 ASX shares to buy next week
• Is February 2022 the time to buy these 2 beaten-up ASX shares?
• Analysts name 2 ASX shares to buy right now
• Top broker tips REA (ASX:REA) shares as a buy ahead of a ‘very strong result’

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

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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.

What happened

Shares of Facebook parent company Meta Platforms (NASDAQ: FB) were absolutely slammed on Thursday, losing about one-fourth of their value. The stock fell as much as 26.6% but is down about 25% as of 11 a.m. ET.

The stock’s pullback is directly related to Meta Platforms’ fourth-quarter update, which featured slowing revenue growth and an earnings miss, as well as a first-quarter outlook that was far below what the Street was hoping for.

So what

Facebook said its fourth-quarter revenue increased 21% year over year to $33.7 billion. This compared to 35% year-over-year revenue growth in the third quarter of 2021. The deceleration was expected, as the company had warned of a tough year-ago comparison, challenges from recent changes to Apple‘s iOS ad tracking, and some ad budget headwinds due to supply chain issues. Earnings per share for the period decreased 5% year over year to $3.67, missing analysts’ average forecast for $3.84. 

The main drag on the tech stock on Thursday is likely what management said about its expectations for the first quarter. Management guided for just 3% to 11% year-over-year growth during the period. Some of the main expected challenges during the period are Apple’s iOS ad tracking and measurement changes, a tough year-ago comparison, and foreign currency exchange rates.

Now what

CFO Dave Wehner is known for being conservative about forecasts. Indeed, many of his expectations for significant revenue decelerations in the past never fully materialized. So investors should view Meta’s first-quarter guidance as conservative. Nevertheless, the degree of the company’s expected deceleration is concerning — and investors should watch to see how reported revenue in Q1 actually fairs. 

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

The post Why Meta shares cratered on Thursday appeared first on The Motley Fool Australia.

More reading

• Why is Twiggy suing Facebook? Hint: It involves cryptocurrency
• Meta (NASDAQ:FB) share price plunges 22%. How might this impact ASX shares?
• 1 green flag and 1 red flag for Meta’s Metaverse dreams
• FAANG Stocks: 2022 Winners and Losers
• Is the metaverse the next big thing? Here’s why ASX investors think so

Daniel Sparks owns Apple. His clients may own shares of the companies mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Apple and Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Meta Platforms, Inc. 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.

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If you’ve been following ASX shares recently, you’ll know that fortunes have dipped the past few weeks.

Despite a mini-rally the past few days, the S&P/ASX 200 Index (ASX: XJO) has nevertheless lost 7% since the start of the year.

Does this mean it’s now time to “buy the dip”?

While some experts are advising investors to wait for further volatility this year, Montgomery Investment Management chief investment officer Roger Montgomery disagrees.

“A 10% to 15% correction is ever-present and when indices fall by that much, you can be sure some individual sectors and stocks will fall much more,” he said on a blog post. 

“Those falls present investors with the opportunity to pay lower prices for excellent businesses that may have been recently out-of-reach.”

Montgomery pointed out that many people seek out bargains with retailers, so why shouldn’t it be the same for stocks?

“I have always fancied the Australian-made Rhino storage and toolboxes available at Bunnings but I could never stomach $129 for a plastic moulded box,” he said.

“In January, Bunnings held a sale for those same boxes and they were just $30 each.  I bought all 3 on the shelf. Investors should buy stocks the same way, holding out for attractive prices.”

Businesses are less volatile than shares

One truism that Montgomery reminded investors of is that shareholders actually own businesses. And the share price is usually far more volatile than the actual performance of these businesses.

“That volatility provides opportunity,” he said.

“Share prices can disengage from the underlying fundamentals, economics and potential of a business. It is during these periods, investors should be sharpening their pencils because, eventually, the share price will reflect the value the business is creating through the process of generating and retaining profits.”

Montgomery acknowledged that rising interest rates, which drove the January sell-off, does diminish the value of future earnings.

But he remains “unconvinced” that high rates of inflation would stick around.

“Companies have invested record amounts in automation and union representation around the world is lower than at any time in modern history,” said Montgomery.

“The upshot is that wages will eventually be under pressure again and given the very high levels of household debt, a few short and sharp rate hikes may be all that is necessary to put the inflation genie back in its bottle.”

Rising rates never stopped shares from heading up

Besides, historically rising rates have not stopped shares from trending upwards.

He took the S&P 500 Index (SP: .INX) between 2015 and 2018 as an example.

“Short term rates were lifted 9 times and yet the market rallied,” said Montgomery.

“Provided — and this is the key — you own companies that are high quality, growing and increasing their intrinsic value, then even rising rates won’t be enough to keep the share price from eventually reflecting its worth.”

He also reminded investors that the equities that have crashed the past few weeks are not on the balance sheets of “systemically important financial institutions”.

“Any equity market rout is unlikely to lead to a financial crisis. A good old market correction – contained to equity markets – should therefore be seen as an opportunity to add or begin investing,” said Montgomery.

“Above all, remember one thing: the lower the price you pay, the higher your return.”

The post Why NOW is the time to buy ASX shares: expert appeared first on The Motley Fool Australia.

More reading

• Is the Westpac (ASX:WBC) share price good value after its first quarter update?
• Down 20% in 2022, is the Ansell (ASX:ANN) share price a bargain buy?
• 2 sold-off ASX tech shares that are opportunities: experts
• Should you buy ASX shares now or wait just a little bit?
• 2 buy-rated ASX dividend shares with attractive fully franked yields

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.

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The Westpac Banking Corp (ASX: WBC) share price was a positive performer on Thursday.

In response to its first quarter update, the banking giant’s shares rose over 2% to $21.07.

What’s being said about Westpac?

The team at Goldman Sachs has been running the rule over the Westpac result and has given its verdict.

According to the note, the broker has mixed feelings about the bank’s performance during the quarter.

Firstly, it was pleased to see Westpac’s cash earnings of $1.58 billion run-rating 4% ahead of what is implied with its half year estimates. The broker notes this was driven entirely by better than expected revenues in the Markets and Treasury businesses.

Another couple of positives were that its bad debt charges were broadly in line with Goldman’s estimates and its CET1 ratio of 12.2% is tracking 17 basis points ahead of expectations.

But that’s largely where the positives end. The broker notes that Westpac’s net interest margin (NIM) fell 8 basis points to 1.91% and that management expects further NIM weakness to occur during FY 2022.

Is the Westpac share price good value?

Goldman Sachs has lifted its price target on the Westpac share price to $26.24. This implies potential upside of approximately 25% before dividends and over 30% including them.

However, despite this huge potential return, the broker isn’t ready to recommend its shares as a buy and has retained its neutral rating.

Goldman explained: “While we remain Neutral on WBC, we do note that management is making progress on a number of its initiatives, and we specifically note: i) while NIM trends were weak, given higher liquids, competition and mortgage mix, it was not materially worse than market expectations, and the market should not forget WBC’s medium term NIM leverage to higher cash rates, ii) underlying costs were well down in the quarter (vs. last half average), management remains committed to further expense reductions in FY22E, management reiterated its FY24 cost target of A$8 bn, and continues to make adjustments to the business model to support this target, and iii) balance sheet settings remain conservative.”

“Further evidence of i) execution on its strategy and/or ii) stabilisation of retail profitability, would see us get more positive,” it concluded.

The post Is the Westpac (ASX:WBC) share price good value after its first quarter update? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• What can the Westpac results tell us about the outlook for ASX 200 bank shares?
• Does the Westpac (ASX:WBC) corporate shake-up go far enough?
• Why Amcor, Boral, Nufarm, and Westpac shares are rising today
• Why these brokers think that the CBA (ASX:CBA) share price is a sell

Motley Fool contributor James Mickleboro owns 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 Bruce Jackson.

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Key points

• The Ansell share price has suffered a 20% drop since the start of the year
• Not only is the company experiencing a fall in demand, but it’s also hurting from COVID impacts on manufacturing and the supply chain
• However, Citi thinks the negative impacts will normalise, making the glovemaker an attractive long-term opportunity

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The Ansell Limited (ASX: ANN) share price has fallen by around 20% since the start of 2022. After such a large drop for this global leader in protective wear, is it now an investment opportunity?

What happened to the Ansell share price?

Whilst part of the Ansell decline occurred when the whole ASX share market was being sold off, it has dropped 17% since providing an FY22 update to investors.

The personal protection business said that it’s expecting FY22 first half sales to be US$1.01 billion. That’s “significant” growth compared to the first half of FY20 and higher than the FY21 first half.

However, there was softer demand for examination and single use products. This led to lower prices, though it managed to achieve lower pricing from outsourced suppliers. But demand slowed faster than expected.

Volumes of outsourced finished goods were lower, with a significant factor being a desire by distributors and end users to work down high levels of inventory before reordering.

However, the surgical, life sciences and mechanical segment delivered a “solid” sales performance. Surgical and life sciences saw particularly good growth in mature markets with new business wins and strong demand conditions.

A combination of shutdowns on manufacturing (leading to lost output) and continued logistics disruption lengthened the delivery time of getting products to customers with the result being that some orders across all businesses were not fulfilled as expected.

The manufacturing shutdowns also meant that there were lower recoveries of fixed costs.

Ansell is expecting to report HY22 earnings before interest and tax (EBIT) of US$111 million and earnings per share (EPS) of US$0.61.

More problems

Not only was the first six months seemingly affecting the Ansell share price, but problems have continued into the second half.

Ansell’s manufacturing facilities are seeing increased numbers of COVID-19, with one factory in Malaysia being asked to shut down. Other factories could potentially have to shut down or operate at partial levels.

The ASX share also noted that the US Customs and Border Protection issued a ‘withhold release order’ on 28 January 2022 against YTY, a major supplier of examination and single use gloves to Ansell, which will prevent its disposable gloves from being imported into the US. YTY will seek to demonstrate its manufacturing operations are free from any forced labour practices. Ansell said it prefers to work with suppliers to achieve meaningful improvement.

Updated profit guidance

Ansell said that due to the lower-than-anticipated performance and YTY supply disruption, and considering the demand and margin outlook, it’s now expecting FY22 EPS to be between US$1.25 to US$1.45 per share, down from US$1.75 to US$1.95 per share.

Analyst rating on the Ansell share price

Some brokers think the business is now at fair value, such as Credit Suisse which is ‘neutral’ on the company and it has a price target of $26.50. Credit Suisse thinks that it may still be a challenge to hit the reduced profit guidance.

However, others still believe the business has long-term return potential, particularly after the sell-off. Citi rates Ansell as a buy, with a price target of $37.50 – more than 40% higher than today. The broker thinks that some of the impacts being faced by Ansell will improve as time goes on.

The post Down 20% in 2022, is the Ansell (ASX:ANN) share price a bargain buy? appeared first on The Motley Fool Australia.

More reading

• Why Amcor, Ansell, Block, and Credit Corp shares are sinking today
• Ansell (ASX:ANN) share price falls again amid broker upgrade
• How will ASX shares perform this earnings season? Experts explain what to look for
• Why Ansell, AnteoTech, Dubber, and NIB shares are dropping
• ASX 200 (ASX:XJO) midday update: Ansell crushed, ResMed upgraded

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

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Key points

• Experts believe that the two ASX tech shares in this article are long-term opportunities
• TechnologyOne is quickly transitioning its clients onto high-margin, attractive software as a service contracts
• Data centre business Nextdc continues to experience strong demand and higher utilisation, which is building its long-term earnings potential

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Plenty of ASX tech shares have been sold off in recent weeks and months. There could be several opportunities to jump on for investors.

However, which businesses are good ones to pursue? Some of Australia’s leading analysts have had their say on some quality technology companies. These two have been named as buys:

TechnologyOne Ltd (ASX: TNE)

TechnologyOne is a leading tech business, it’s the largest enterprise software company on the ASX.

This business provides a global software as a service (SaaS) enterprise resource planning (ERP) solution that helps businesses. The software can be used anywhere and is reportedly easy to use. Over 1,200 leading corporations, government agencies, local councils and universities are powered by its software.

TechnologyOne is transitioning its clients onto recurring software as a service (SaaS) contracts. The company said this revenue stream is “exceptionally high” because of the recurring nature, combined with a very low churn rate of around 1%.

In FY21, the ASX tech share’s total annual recurring (ARR) was $257.6 million, up 16%. It’s on track to hit its target of $500 million by FY26. By FY24, it’s expecting to be growing its total revenue by more than 15% per annum.

Profit margins continue to rise, helping the bottom line. The profit before tax margin increased to 31%, up from 28% in the prior year. It’s expecting this to reach higher than 35% in the coming years, thanks to significant economies of scale from its SaaS offering.

TechnologyOne says it’s on track to double the size of its business in the next five years.

It’s currently rated as a buy by Morgans with a price target of $13.73. That’s more than 30% higher than where it is right now.

Nextdc Ltd (ASX: NXT)

Nextdc is a leading data centre provider. It says it’s building the infrastructure platform for the digital economy, delivering the critical power, security and connectivity for global cloud computing providers, enterprise and government.

Demand is quickly growing for its data centres. At the end of January 2022, it said that after recent customer wins, contracted utilisation (excluding options and reservations) has increased by around 5.5MW since the end of FY21 to around 81MW at 31 January 2022.

Revenue for most of the new contracted capacity is expected to be recognised from FY23 onwards after completion and commissioning of the associated data halls.

The ASX tech share says that the sales pipeline remains robust, with the company seeing the strong sales momentum carrying forward into the second half of FY22. It continues to invest in more digital infrastructure to support the new contracted capacity which will turn into annuity-style economic returns over the long-term for investors.

Third generation ‘hyperscale’ data centres, M3 and S3, are expected to be brought into service at the end of FY22.

The Nextdc share price has fallen 20% in 2022.

Citi thinks Nextdc is a buy, with a price target of $15.40. That implies a potential increase of around 50% over the next 12 months. The broker likes the amount of demand and development progression that the company is seeing. Asian expansion could also be getting closer.

The post 2 sold-off ASX tech shares that are opportunities: experts appeared first on The Motley Fool Australia.

More reading

• Why did ASX 200 tech shares get annihilated today?
• TechnologyOne (ASX:TNE) share price jumps on broker upgrade
• Leading brokers name 3 ASX shares to buy today
• Why is the NextDC (ASX:NXT) share price climbing today?
• 3 buy-rated ASX shares that just hit 52-week lows

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 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.

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Despite a mini-revival the past couple of days, the S&P/ASX 200 Index (ASX: XJO) is still down about 7% this year.

But with interest rate rises still to come in the United States and Australia, there could be more volatility ahead for ASX shares.

So many investors are now scratching their heads, asking themselves whether they should pick up bargains now or wait. After all, stocks could be even cheaper later this year, right?

Switzer Financial director Paul Rickard had an answer for this dilemma in a video this week.

Save some ammo for later

Rickard said he had grabbed some Xero Limited (ASX: XRO) shares last month, but other than that he hasn’t yet “rushed into” bargain buying.

“I just felt that the lead out of the US was too strong,” he told Switzer TV Investing.

“Clearly we’re not going to get any clarity on the Fed[eral Reserve] until March. It only takes a couple more outlandish figures and suddenly the market will go from talking 4.5 [rate] increases to talking 7 increases.”

Until that uncertainty has settled, Rickard feels like there could be more price falls to come for ASX shares.

“That’s going to produce some more [buying] opportunities… Hold a bit of powder.”

Having said this, Rickard did remind ASX shares investors that trying to pick the bottom is a futile exercise.

“I never try to pick the bottom. I will not pick the bottom. I know that,” he said.

“But I just feel we’ve got a little bit more in this [correction].”

Could the federal election produce an unstable government?

Another cloud over share markets that concerns Rickard has not yet been widely discussed in financial media.

“The other thing that worries me locally is the [federal] election,” he said.

“I know that’s not till May, but you look at the poll this morning in The Australian, that’s a horrendous poll [for the incumbent].”

The federal budget will be handed down on 29 March, with an election likely to be called soon after that. It must be held at some time in May.

The ruling Coalition will be judged on its handling of the COVID-19 pandemic, especially the way it navigated the latest Omicron variant.

Labor leader Anthony Albanese will be putting the case forward for a change of government.

“The odds are going to be a weak Albanese government with [supportive] independents, or a weak prime minister,” said Rickard.

“There’s a bit of political risk here in our markets… I’d be a little bit careful.”

The post Should you buy ASX shares now or wait just a little bit? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why did ASX 200 tech shares get annihilated today?
• Here are the top 10 ASX shares today
• These 2 ASX 200 shares have tumbled into the buy zone: Expert
• Should you buy or sell in a market crash? Here’s what Warren Buffett says

Motley Fool contributor Tony Yoo owns Xero. 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.

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Looking for dividend shares to buy this month? Then have a look at the ones listed below that have been given buy ratings.

Here’s what you need to know about these dividend shares:

Australia and New Zealand Banking Group (ASX: ANZ)

If you don’t already have exposure to the banking sector, then this banking giant could be a dividend share to buy. That’s the view of the team at Bell Potter, which currently has a buy rating and $31.00 price target on the bank’s shares.

It could be a top option due to its strong position in commercial banking, which gives the bank some protection from the margin pressures being experienced in retail banking from aggressive competition for mortgages.

As for dividends, Bell Potter is forecasting some generous dividend payments in the near term. It has pencilled in fully franked dividends per share of 144 cents in FY 2022 and then 151 cents in FY 2023. Based on the current ANZ share price of $27.07, this implies yields of 5.3% and 5.6%, respectively, over the next two years.

Coles Group Ltd (ASX: COL)

Another ASX dividend share that could be in the buy zone is Coles. It is of course one of Australia’s biggest retailers with over 800 supermarkets, over 900 liquor retail stores, and over 700 Coles express stores.

Thanks to this store network, which continues to grow, its track record of consistent same store sales growth, and its focus on automation, Coles has been tipped to continue its solid growth long into the future. Combined with its favourable dividend policy, this bodes well for dividends in the coming years.

Citi is a fan of Coles and sees a lot of value in its shares right now. It currently has a buy rating and $19.50 price target on them.

As for dividends, the broker is forecasting fully franked dividends per share of 64.5 cents in FY 2022 and 71.5 cents in FY 2023. Based on the current Coles share price of $16.61, this implies yields of 3.9% and 4.3%, respectively.

The post 2 buy-rated ASX dividend shares with attractive fully franked yields appeared first on The Motley Fool Australia.

More reading

• What can the Westpac results tell us about the outlook for ASX 200 bank shares?
• How are ASX bank shares responding to the RBA’s interest rate call?
• This top ASX broker tips Coles (ASX:COL) shares for 20% upside
• This broker just upgraded the ANZ (ASX:ANZ) share price to a buy. Here’s why
• How does the Macquarie (ASX:MQG) dividend compare to the big four banks?

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

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On Thursday, the S&P/ASX 200 Index (ASX: XJO) edged lower due largely to weakness in the tech sector. The benchmark index fell 0.15% to 7,078 points.

Will the market be able to bounce back from this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to tumble

The Australian share market looks set to end the week in the red. According to the latest SPI futures, the ASX 200 is expected to open the day 0.8% lower this morning. This follows a very poor night on Wall Street, which late on sees the Dow Jones down 0.85%, the S&P 500 down 1.7%, and the Nasdaq down 2.7%.

REA Group half year results

The REA Group Limited (ASX: REA) share price will be one to watch today when it releases its half year results. According to a note out of Goldman Sachs, its analysts are expecting the property listings company to outperform the market’s expectations with revenue of $592 million and EBITDA of $373 million. This is ahead of the consensus estimates by 4% and 7%, respectively.

Oil prices storm higher

Energy producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could have a great day after oil prices stormed higher. According to Bloomberg, the WTI crude oil price is up 2.2% to US$90.19 a barrel and the Brent crude oil price is up 1.8% to US$91.05 a barrel. Oil prices stormed higher amid further supply concerns.

Gold price softens

Gold miners Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a subdued finish to the week after the gold price softened. According to CNBC, the spot gold price is down 0.2% to US$1,806.90 an ounce. The gold price snapped its winning streak after the US dollar strengthened.

Goldman remains neutral on Westpac

The team at Goldman Sachs has responded to the Westpac Banking Corp (ASX: WBC) first quarter update by retaining its neutral rating but lifting its price target slightly to $26.24. Goldman commented: “While we remain Neutral on WBC, we do note that management is making progress on a number of its initiatives.”

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

More reading

• What can the Westpac results tell us about the outlook for ASX 200 bank shares?
• Here are the top 10 ASX shares today
• Does the Westpac (ASX:WBC) corporate shake-up go far enough?
• Should you buy or sell in a market crash? Here’s what Warren Buffett says
• These 3 ASX 200 shares are topping the volume charts this Thursday

Motley Fool contributor James Mickleboro owns 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 REA Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Following the release of its first-quarter update today, shares in Westpac Banking Corp (ASX: WBC) snaked higher to finish 2.28% in the green at $21.07.

That’s a fairly robust outcome for what was by all intentions supposed to be considered a fairly rudimentary and underwhelming update for the three months.

However, the market paid for what Westpac had to offer in its update today, which has us wondering – what do the bank’s results say about the outlook for ASX 200 bank shares this year?

Naturally, a flurry of broker updates has come through in response to Westpac’s earnings. However, all the banking majors are getting a mention today. Let’s take a closer look.

What’s in store for ASX 200 banks after Westpac’s results?

Speaking on Westpac’s results, the team at Citi chimed in with a relatively positive note.

The broker reckons investors might see Westpac’s Q1 earnings with an upbeat mentality. Particularly seeing as Westpac has a good opportunity to reduce its cost base.

For instance, Citi noted that Westpac had cash earnings of almost $1.6 billion for the quarter, a 1% year-on-year gain on the average for the entire 2H FY21. Not only that, it was 13% ahead of Citi’s estimates at the lower range.

Much of the talk this year with ASX 200 bank shares has been the foreseeable challenges to net interest margins (NIMs) this year, with the consensus baking in a reduction to NIMs across the board in 2022.

However, Westpac’s NIMs were largely in line with the broker’s estimates. The bank’s reduction cost base also adds some weight to its commitment to reducing its cost base to $8 billion in the next 2 years.

UBS on the other hand wasn’t as rosy, saying the bank’s NIMs were a tad “disappointing” in its update to clients today. The Swiss investment bank was underwhelmed by this result but encouraged by Westpac’s commitment to reducing its cost base in FY24.

This was backed by Westpac’s actual performance during the quarter, in reducing those costs by a meaningful degree.

“The Q1 22 update today, in our view, confirms management’s absolute commitment to deliver this [reduction]” the broker said.

“This is something the market has not factored in based on our analysis”.

Meanwhile, skipping over to Commonwealth Bank of Australia (ASX: CBA), Morgan Stanley chimed in with a note following Westpac’s earnings results. Here the broker reckons Australia’s largest bank could see its revenue drop by around 2% compared to the previous half.

It baked in margin pressures, lower fees, and higher insurance claims to offset growth of its interest-earning assets in its downside scenario.

The broker provided its insights on the shifting interest rates cycle, price competition, and the current state of the mortgage market.

It reckons CBA will maintain a healthy CET-1 ratio of 11–11.5%. However, it thinks this won’t be approved for another share repurchase scheme.

In direct contrast, researchers at UBS reckon CBA is a gold standard pick when it comes to investing in ASX bank shares, using Westpac’s results as a benchmark.

The firm values CBA’s brand and franchise at high esteem – higher than any other bank – especially given its size, earnings power, and technology integration in operations.

Still, UBS initiated coverage on CBA with a neutral rating, valuing the company at $95 per share in the process.

It is forecasting CBA’s NIMs to bottom at 1.98% and then subtly increase over time to reach 2.15% as nominal interest rates begin to rise.

What else was said?

Macquarie also updated the market with its outlook for ASX 200 bank shares today, noting there is potential for majors to face downside risk to their earnings in the first half of FY22.

Analysts at Macquarie reckon lower markets income poses a direct threat to bank earnings this season. It noted that Australia and New Zealand Banking Group Ltd (ASX: ANZ) in particular faces $100–$200 million in potential loss to its markets income. Sector-wide, it estimates a 7% reduction in markets income compared to FY19.

The broker also wound back its forecasts on National Australia Bank Ltd (ASX: NAB)’s markets income for FY22 after it came in with a weak set of results at the last reporting season. Nonetheless, it sees more risk in ANZ than it does for its counterpart.

“On a relative basis, we see a bigger risk to ANZ and a smaller risk to NAB, which has already seen a substantial rebasing in its trading income,” the firm said.

UBS is also cautious on ANZ’s outlook following the release of Westpac’s results today. It says the market is pricing in a low chance of success to turn its mortgage business around.

The broker notes that ANZ has likely wiped $6 billion of market cap off its value following a series of poor performances in this segment.

“While management highlighted expectations for the home loan portfolio to return to growth in 1H FY 2022, so far this does not appear to be the case, with ANZ losing a further 20 basis points of total home loan share to November 2021,” it said in a separate note today.

However, UBS initiated coverage on ANZ with a buy rating and values the company at $30 per share, signifying around $3 of upside protection at the time of writing.

All in all, sentiment appears mixed on the sector heading through the early stages of 2022.

The post What can the Westpac results tell us about the outlook for ASX 200 bank shares? appeared first on The Motley Fool Australia.

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• Here’s what this broker thinks of the Westpac (ASX:WBC) Q1 result

Motley Fool contributor Zach Bristow 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 and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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