Tag: Motley Fool

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The WiseTech Global Ltd (ASX: WTC) share price is under more pressure as the sell-off in ASX tech shares continues today.

At the time of writing, shares in WiseTech have cratered 7.78% into the red and are trading at $42.68 apiece. Let’s take a look at the price action from today.

What’s up with WiseTech today?

WiseTech shares started the day poorly and had sunk by almost $1.40 per share from the previous close at the open today.

This trend continued all morning before shares finally bottomed around midday. They have been rangebound ever since, on a very thin volume of just 29% of its 4-week average trading volume.

Plus this activity has all occurred in the absence of any price-sensitive information from the company today.

However, the carnage has extended into the whole ASX tech sector, with the S&P/ASX All Technology index (XTX) also down more than 4% on the day as well.

It has plunged almost 17% this year to date, whereas the WiseTech share price has sunk around 27% in the same time, as seen on the chart below.

ASX tech shares have been rocked in 2022 amid a sector-wide correction that’s been brought on by rising yields on long-dated US Treasury bonds.

Given these rates are used as proxy figures to calculate the valuations of assets such as equities, ASX shares in general have been hit hard as these bond yields have risen.

Plus the impact is disproportionate to high-beta tech shares, given their sensitivity to changes in the yield curve and in the overall market.

The current 10-year US Treasury yield is 1.76%, having gained 67 basis points in the last year and 25 basis points in the last month alone.

Hence as investors reshuffle capital and flock to the more defensible and quality corners of the market, these outflows are likely to hurt tech shares such as WiseTech and family.

WiseTech share price summary

In the last 12 months, the WiseTech share price has climbed more than 31%. However, the selling pressure has crept in and left investors in the red this year.

WiseTech hares are also down around 11% in the past week.

The post Tech train wreck: WiseTech (ASX:WTC) share price tumbles 8% appeared first on The Motley Fool Australia.

More reading

• With Afterpay shares no longer listed, is WAAAX officially dead?
• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• 2 ASX shares to buy in the current bloodbath
• Is the Wisetech (ASX:WTC) share price a bargain after plunging 26% so far this year?
• What happened to ASX tech shares today?

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. owns and has recommended WiseTech Global. The Motley Fool Australia owns and has recommended WiseTech Global. 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 S&P/ASX 200 Index (ASX: XJO) has given up its earlier gains this week and is now in red ink territory. At the time of writing, the ASX 200 has lost 0.2% and is sitting at 7,073 points.

But rather than dwelling on that, let’s instead check out the companies that are topping the share market’s volume charts right now, according to investing.com and ASX data.

The 3 most traded ASX 200 shares by volume

BHP Group Ltd (ASX: BHP)

BHP yet again makes the list this Thursday. This ASX 200 mining giant has had a hefty 11.24 million shares bought and sold so far today. BHP shares are having another robust day on the ASX. The BHP share price is currently up by 2.8% at $46.93 a share. BHP’s unification is also likely to be a contributing factor as well. The company has just relocated to the ASX in full, ending its London dual-listing. It’s probably for these reasons that we find the Big Australian on this list today.

Telstra Corporation Ltd (ASX: TLS)

ASX 200 telco Telstra is the next ASX 200 share on our list today. This blue-chip giant has seen a healthy 11.71 million of its shares swap hands so far this Thursday. There’s no major news or announcement out of Telstra today. However, the company did make some big announcements yesterday in regards to some new projects, which might still be in play here. The Telstra share price is currently up 1.2% at $4.03.

Pilbara Minerals Ltd (ASX: PLS)

Finally, we have our most traded ASX 200 share of the day thus far in Pilbara Minerals. This ASX 200 lithium producer has had a notable 12.87 million shares trade on the ASX so far today. Again, there’s not much in the way of news or announcements out of Pilbara. However, Pilbara has suffered a nasty share price fall today. Pilbara is currently down 2.9% at $3.31 a share after a big gain yesterday. It’s this loss that is probably the smoking gun for Pilbara’s elevated trading volumes this Thursday.

The post These 3 ASX 200 shares are topping the volume charts this Thursday appeared first on The Motley Fool Australia.

More reading

• Morgans names the best ASX resources shares to buy in February
• Energy stocks surge and RBA hoses down the chances of a rate rise. Scott Phillips on Nine’s Late News
• The Vanguard Australian Shares ETF (ASX:VAS) is about to get a major 2022 makeover. Here’s what is changing…
• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• Here’s why the BHP (ASX:BHP) share price is rebounding in 2022

Motley Fool contributor Sebastian Bowen owns Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a decline. At the time of writing, the benchmark index is down 0.3% to 7,070.2 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are rising:

Amcor (ASX: AMC)

The Amcor share price is up 3% to $16.84. Investors have been buying this packaging company’s shares after brokers stayed positive on it despite its half year results falling short of expectations. One of those brokers was Morgans. This morning the broker retained its add rating but cut its price target to $18.35.

Boral Limited (ASX: BLD)

The Boral share price has continued its positive run and is up a further 2% to $6.58. Investors have been buying this building materials company’s shares since it announced a multibillion-dollar capital return for shareholders. According to the release, Boral intends to return $3 billion of surplus capital to shareholders. This will be via a $2.65 per share capital reduction and an unfranked 7 cents per share dividend.

Nufarm Ltd (ASX: NUF)

The Nufarm share price has jumped 17% to $5.45 following the release of a trading update. According to the release, the agricultural chemicals company’s first quarter revenue grew 36% over the prior corresponding period. Management advised that this was supported by favourable weather conditions.

Westpac Banking Corp (ASX: WBC)

The Westpac share price is up 2% to $21.02. This follows the release of the banking giant’s first quarter update. Westpac reported cash earnings of $1.58 billion for the three months. This was up 1% excluding notable items over the quarterly average during the second half of FY 2021. Goldman Sachs notes that this means the bank is run-rating 4% ahead of its first half estimates.

The post Why Amcor, Boral, Nufarm, and Westpac shares are rising today appeared first on The Motley Fool Australia.

More reading

• Why these brokers think that the CBA (ASX:CBA) share price is a sell
• Nufarm (ASX:NUF) share price leaps 15% as revenue soars
• Energy stocks surge and RBA hoses down the chances of a rate rise. Scott Phillips on Nine’s Late News
• Here’s what this broker thinks of the Westpac (ASX:WBC) Q1 result
• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink

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 owns and has recommended Amcor Limited. 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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The S&P/ASX 200 Index (ASX: XJO) has undergone some major changes over the past month. For one, BHP Group Ltd (ASX: BHP) is now the largest share on the ASX. Now that BHP’s unification program, which ended its London dual-listing, has come into effect, it has pipped Commonwealth Bank of Australia (ASX: CBA) for the top spot on the ASX. But another major change was the removal of Afterpay. So does Afterpay’s departure mean that ‘WAAAX’ is officially dead?

Afterpay officially left the ASX boards earlier this week. This comes after the company was acquired in full by the US payments giant Block Inc (NYSE: SQ), which was formerly known as Square. In Afterpay’s place, Block now has an ASX listing under Block Inc (ASX: SQ2).

But this poses a question. Since Afterpay was a core member of the WAAAX group of shares, does this mean it’s finally WAAAX off?

WAAAX is the acronym given to WiseTech Global Ltd (ASX: WTC), Altium Limited (ASX: ALU), Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO). Afterpay, of course, makes (or made) up the final ‘A’.

WAAAX on or WAAAX off?

When investors first started throwing around the WAAAX acronym a few years ago, it was arguably a response to the famous ‘FAANG stocks. Those were the US tech giants that continued to give investors stellar gains over the past decade or so. Those were Facebook, now Meta Platforms Inc (NASDAQ: FB), Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX) and Google-owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL).

The companies that were to become the WAAAX shares were all home-grown ASX tech darlings that quickly all started giving investors very pleasing gains. Those were especially evident across 2017, 2018 and 2019.

But even before Afterpay’s ASX departure, the wheels had arguably started to fall off the WAAAX train. If Afterpay was the only hitch here, we could perhaps move to change WAAAX to BWAAX, or perhaps WAAXB. My personal pick would be ABWAX…

But Afterpay’s morph into Block isn’t the only problem. Not all participants had kept the gains coming. The Altium share price is at the same level today as it pretty much was back in February 2019. Appen has faired even worse. It’s down almost 80% from its August 2020 all-time high. And Xero shares haven’t gone anywhere in close to 2 years either.

So perhaps WAAAX is dead for a different reason – there’s arguably just not too much to gain from grouping these companies together anymore.

The post With Afterpay shares no longer listed, is WAAAX officially dead? appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• Why is the Appen (ASX:APX) share price down 7% today?
• The Xero (ASX:XRO) share price is trailing the ASX 200 by a whopping 18% so far in 2022. What’s next?
• Why Amcor, Ansell, Block, and Credit Corp shares are sinking today
• Here’s why the Altium (ASX:ALU) share price is ‘significantly undervalued’

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Motley Fool contributor Sebastian Bowen owns Alphabet (A shares) and Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Afterpay Limited, Alphabet (A shares), Altium, Appen Ltd, Block, Inc., Meta Platforms, Inc., WiseTech Global, and Xero. The Motley Fool Australia owns and has recommended Afterpay Limited, Appen Ltd, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Netflix. 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 Jindalee Resources share price has risen 22% in 2 days
• The move comes after a successful lithium interception at its United States mine
• A global supply shortage of lithium may be on the horizon

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The Jindalee Resources Limited (ASX: JRL) share price is soaring again today on the back of 2 updates released yesterday.

The miner announced a pleasing interception at its US mine and a corporate snapshot of its latest activities.

These announcements coincided with the Jindalee Resources share price shooting up by 16% yesterday. And the gains are continuing today. At the time of writing, the Jindalee Resources share price is up a further 5.15% to $3.06.

Let’s take a look underground…

Multiple new near-surface lithium intercepts

Yesterday, the miner announced it had intercepted 6 mineralised zones of lithium (Li) at its McDermitt Lithium Project. The mine is 100% owned by Jindalee and is located in Malheur County on the Oregon-Nevada border.

Jindalee describes McDermitt as a “low cost mining operation” and “one of the largest lithium deposits in the US”.

The site hit “six mineralised zones of lithium with a best result of 29.0m of 1,801 ppm Li that included a 12.2m wide zone grading over 2,500 Li”.

These results mirror the mineral estimate predicted in April last year.

Jindalee Resources said assays from 6 diamond holes are still pending. The results are expected to follow this quarter.

Growing global demand for lithium

Based on the miner’s scoping study in September, the US site has the potential “to support a viable standalone lithium mining and processing operation” and to be a “long-life source of future supply to the rapidly growing US battery manufacturing industry”.

Looking forward, the next phase of drilling for the year is ready to go with all permits acquired.

In its corporate report yesterday, Jindalee Resources reported a cash holding of $8.7 million, no debt, and an enterprise value of $129.5 million.

The miner also believes a “significant supply shortage” is on the horizon. This will be driven by rising demand for electric vehicles and by US President Joe Biden’s commitment to zero emissions by 2050.

Jindalee Resources share price snapshot

Over the past 12 months, the Jindalee Resources share price has increased by 53%. It saw its highest price of $3.90 in August and its lowest of $1.40 in February last year.

The company has a market capitalisation of $168 million.

The post New lithium discovery sends this ASX mining share soaring 22% in 2 days appeared first on The Motley Fool Australia.

More reading

• Why has the Advanced Human Imaging (ASX:AHI) share price plummeted 57% in a month?
• Why is this broker so bullish on the IGO (ASX:IGO) share price?
• ASX gold shares in focus amid “whale” rumours
• Why these brokers think that the CBA (ASX:CBA) share price is a sell
• Morgans names the best ASX resources shares to buy in February

Motley Fool contributor Alice de Bruin 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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Key points

• It’s been a tough month for the Advanced Human Imaging share price
• In that time, the company has announced a new binding term sheet and released its quarterly report
• Its stock might have also been impacted by the tech sector’s struggles

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The Advanced Human Imaging Ltd (ASX: AHI) share price has tumbled over the last 30 days.

It has slumped from 99 cents this time last month to trade at 42 cents today. That represents a 57% dip and includes today’s 11% plummet.

For context, the broader market has also fallen over the last month, but not nearly as severely. The S&P/ASX 200 Index (ASX: XJO) has fallen 6.9% while the All Ordinaries Index (ASX: XAO) is down 7.1%. They are down 0.3% and 0.5% respectively today.

Let’s take a look at what might be dragging the imaging software creator’s shares downwards.

What’s weighing on the Advanced Human Imaging share price lately?

It’s been a rough few weeks for the Advanced Human Imaging share price despite the company’s silence for most of the last month. However, over the last 7 days, it has released 2 price-sensitive announcements to the market.

First, the company announced it had signed a binding term sheet with digital health provider Activate Health OÜ.

The term sheet will see Activiate integrating the AHI MultiScan digital health solution into its Estonian medical device platform.

Additionally, the company released an update on its performance over the December quarter on Monday.

Advanced Human Imaging listed on the Nasdaq Index last quarter. The company ultimately ended up raising around US$12 million through its United States IPO.

It also noted progress on products made by Nexus-Vita and Tinjoy using its CompleteScan platform.

So far, the company has received US$100,000 for work to integrate its Complete Span platform into Nexus-Vita’s offering. However, Tinjoy’s launch has been dampened by China’s government’s COVID-19 strategy.

Finally, in non-price sensitive news, Advanced Human Imagining announced the signing of another binding term sheet yesterday, this time with South Africa-based Vertica Health. It will see Vertica Health integrating the AHI MultiScan SDKs.

However, the tech sector’s movements might have helped weigh down the Advanced Human Imagining share price over the last month.

While the ASX 200 has undoubtedly fallen, the S&P/ASX 200 Information Technology Index (ASX: XIJ) has tumbled 23%, including today’s 6% fall.

The post Why has the Advanced Human Imaging (ASX:AHI) share price plummeted 57% in a month? appeared first on The Motley Fool Australia.

More reading

• Why is this broker so bullish on the IGO (ASX:IGO) share price?
• ASX gold shares in focus amid “whale” rumours
• Why these brokers think that the CBA (ASX:CBA) share price is a sell
• Morgans names the best ASX resources shares to buy in February
• The 2022 outlook for Beach Energy (ASX:BPT) shares is sunny: expert

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 Bruce Jackson.

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The IGO Limited (ASX: IGO) share price is edging lower in Thursday’s session and is currently down 1.40% at $11.97.

Zooming out over the last 3 months and we see the mining giant’s shares have crawled northwards with barely a hiccup along the way.

Its shares have rallied as high as 47.5% in that time to kiss 52-week highs of $13.35 just two weeks ago, before settling back down.

As seen on the chart below, IGO has broken away from the benchmark S&P/ASX 200 Index (ASX: XJO) and the divergence is becoming wider as time goes on.

As such the team at JP Morgan has been constructive on IGO for some time, particularly favouring the mining giant’s exposure to lithium within its portfolio. It touts IGO as a “one-stop stock for [electric vehicle] EV raw material”. Let’s see what it had to say in a note from Monday.

IGO beats analyst estimates

Speaking on the company’s most recent quarterly results released on January 31, analysts at JP Morgan noted that a robust quarter led to an outperformance at the net profit after tax (NPAT) level.

Specifically, NPAT came in at $52 million for Q2 FY22 – totalling $91 million for the first half – and a 1H FY22 net cash balance of $570 million. That was ahead of the broker’s forecasts of $84 million and $558 million respectively.

Not only that, but guidance for the Greenbushes lithium mine is for higher production and lower cost in FY22 versus the broker’s internal estimates.

Notably, resources at the mine have increased to 45 million tonnes (Mt) at 2.0% versus old resource levels of 38.5Mt at 2.1% in 2018.

Production guidance for IGO’s lithium segment in FY22 is also forecast well ahead of JP Morgan’s estimates. The company is expecting to produce 1,100–1,250kt versus the broker’s 1,057kt figure.

Meanwhile, costs are expected to fall in the range of $300–$400 per tonne. That’s 20-40% below what JP Morgan was baking into its models.

Nonetheless, the broker still forecasts $681 million in revenue for the company in FY22 and $652 million in FY23. This should carry through to earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $492 million and $1.07 billion respectively in its model.

Hence, while it sees IGO’s top-line growth begin to slow (and perhaps even decrease) over the next 2 years, it anticipates a massive run-up in operating income and free cash flow (FCF).

In fact, the broker forecasts $262 million of FCF in FY22, accelerating to $930 billion in FY23 – a 254% jump. That represents FCF yields of 3.3% and a mammoth 11.5% respectively.

Profits in the offing

JP Morgan reckons IGO is set to be incredibly profitable over the coming years. It is forecasting a return on equity (ROE) of 26–27% over the next 2 years.

It also forecasts the resource giant’s dividend yields to track from less than 1% this year to almost 4% in FY23 and 6% the year after.

Plus at the current IGO share price, combined with JP Morgan’s earnings estimates, the company is trading on a forward price to earnings (P/E) ratio of 9x in FY23, dropping to 8.2x in FY24. Currently, it trades at 58x P/E on last check.

The firm is heavily bullish and values IGO at $12.90 per share. Fellow brokers Jefferies, Credit Suisse, and Canaccord Genuity set price targets of $15.50, $15.30, and $13.00 on the stock in January.

IGO share price summary

In the last 12 months, the IGO share price has climbed around 85% and has outpaced all benchmark indices.

This year to date, the company’s shares are up more than 4%.

The post Why is this broker so bullish on the IGO (ASX:IGO) share price? appeared first on The Motley Fool Australia.

More reading

• Leading brokers name 3 ASX shares to sell today
• IGO (ASX:IGO) share price lower as revenue slides 18%
• Leading fund manager says these blue-chip ASX shares are buys right now
• Leading brokers name 3 ASX shares to buy today
• What is JP Morgan saying about ASX lithium shares?

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 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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Highlights:

• There’s speculation that a central bank is snapping up gold at around US$1,800/ounce, reports Bloomberg
• The whale (large buyer) is covering its tracks well with little evidence of buying frenzy
• But gold’s 19 failed attempts to break below US$1,800 since July 2020 points to strong support for bullion

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Rumours that a large buyer is snapping up gold could bring relief to ASX gold shares after a poor start to 2022.

The gold price has repeatedly tried and failed to drop significantly below US$1,800 an ounce despite worsening fundamentals.

This prompted Bloomberg to speculate that there is a “whale” stepping in to buy the precious metal every time the price dips below that price point.

Why ASX gold miners have lost their shine

That would be great news for ASX gold producers. The Newcrest Mining Ltd (ASX: NCM) share price, Evolution Mining Ltd (ASX: EVN) share price and Northern Star Resources Ltd (ASX: NST) share price are all nursing losses of around 10% each since January.

The dimming outlook for the store of value is driven by the prospects of a sharp rise in global interest rates.

Unlike bonds, gold doesn’t pay a dividend or coupon. Higher rates will make it more attractive for safe haven investors to buy government bonds instead of holding gold.

Whale buyer as elusive as Moby Dick

If there is a very substantial buyer of gold that’s backstopping the gold price, ASX gold shares could find renewed buyer interest. This is particularly so if the Australian dollar continues its downtrend against the greenback.

There is no evidence to prove or disprove the whale theory. But it might explain why the gold price attempted 19 failed attempts to drop below US$1,800 since July 2020.

“In the past year, the modeled value of gold, based on a regression study that includes the dollar, real rates and ETF holdings, dropped nearly 10%,” reported Bloomberg.

“Yet the metal’s price only fell around 2%. Clearly, there is a big buyer who considers the metal a long-term hold.”

On the hunt for a whale

Whale or not, the buyer or buyers are skilled at avoiding detection. The buying activity is not showing up in Exchange Traded Fund (ETF) holdings or in the futures market.

This means that the big buyer is making its purchases in the London over-the-counter market, speculated Bloomberg.

But again, finding evidence of such activity is hard. Gold holdings at vaults under the London Bullion Market Association purview only showed a small two million troy ounces rise to 309 million troy ounces in the year to December 2021.

The London Bullion Market Association’s vaults include holdings from ETFs and some central banks.

Big gold buyer likely to be a central bank

“That would suggest that whoever is buying is able to buy in scale, leave little footprint in the market and then take delivery and store the metal in secure, invisible vaults,” added Bloomberg.

“And that points strongly toward a sovereign buyer.”

While central banks usually declare their gold inventory to the International Monetary Fund (IMF), history shows this isn’t always the case.

Bloomberg noted that China did not report any changes to its gold store from 2009 to 2015. It only confessed later that it purchased 53 million ounces of the yellow metal over the period.

ASX gold shares thriving in the mystery

Given the threat of US sanctions and heightened geopolitical tensions, it certainly makes sense for some central banks to favour gold in the event that they get cut off from the world’s reserve currency – the US dollar.

This is one hypothesis that shareholders in ASX gold shares will be gleefully backing.

The post ASX gold shares in focus amid “whale” rumours appeared first on The Motley Fool Australia.

More reading

• Why is this broker so bullish on the IGO (ASX:IGO) share price?
• Why these brokers think that the CBA (ASX:CBA) share price is a sell
• Morgans names the best ASX resources shares to buy in February
• The 2022 outlook for Beach Energy (ASX:BPT) shares is sunny: expert
• Nufarm (ASX:NUF) share price leaps 15% as revenue soars

Motley Fool contributor Brendon Lau owns Newcrest Mining Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Some brokers reckon that the CBA share price is a sell, thinking it’s going to drop this year
• The bank may be facing income pressure in the first half of FY22
• CBA is expected by some brokers to pay a grossed-up dividend yield of 5.8% in FY22

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The Commonwealth Bank of Australia (ASX: CBA) share price has dropped around 10% since the start of the 2022 calendar year. But some brokers think that there are more declines to come.

Historically, CBA shares have been priced more expensively than the other ASX banks of Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).

But some brokers like Macquarie and Morgans believe that the CBA share price valuation is too high.

Sell calls on the CBA share price

Morgans rates CBA as ‘reduce’ and Macquarie thinks that CBA is going to ‘underperform’.

Macquarie reckons that CBA is going to fall around 5% over the next 12 months, with a price target of $88.50. After looking at how US banks performed, the broker thinks there is a risk of a drop of market income in HY22.

Morgans is much more pessimistic about the prospects of the CBA share price, with a price target of just $74. That would be a drop of more than 20% over the next 12 months. This broker is expecting CBA to generate half-year cash profit of $4.3 billion and pay an interim dividend of $1.74 per share.

Full year estimates

Looking at the broker’s estimates for FY22, Macquarie thinks that CBA is valued at 20x this year’s projected earnings. Morgans’ numbers put the bank at 18x FY22’s estimated earnings.

Turning to the dividend, which plenty of retail investors like CBA for, Macquarie thinks Australia’s biggest bank will pay a grossed-up dividend yield of 5.8% in FY22 at the current CBA share price. Morgans’ estimate is very similar, with the broker having a forecast grossed-up dividend yield of 5.8% from the bank.

Latest insight into profitability

The best insight that investors can get is what the bank itself says. In November 2021, the bank reported how well it did in the three months to 30 September 2021.

In that quarter, it generated statutory net profit of $2.3 billion and cash net profit of $2.2 billion. Reported continuing cash net profit was up 20% year on year, but down 9% against the FY21 second half quarterly average. Pre-provision profits were “stable”.

Income was down 1%, with above system volume growth helping to offset continued margin pressures and lower non-interest income. The net interest margin (NIM) was “considerably lower” because of higher liquid balances, home loan price competition and customers switching to lower margin fixed rate loans, as well as the continued impact of a low interest rate environment.

Looking at the costs, operating expenses (excluding remediation costs) were actually 3% higher, mainly due to higher staff costs from lower annual leave usage during the lockdowns.

CBA share price snapshot

Whilst CBA shares are down 1% today and around 10% this year, it still registers a gain of approximately 7% over the last 12 months.

The post Why these brokers think that the CBA (ASX:CBA) share price is a sell appeared first on The Motley Fool Australia.

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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 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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At the start of each month, the team at Morgans picks out its best ideas for investors. These are the ASX shares that it believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.

Yesterday we looked at financial shares that have made the list this month. You can read about them here. Whereas on this occasion we’ll take a look at the resources sector. Here are the picks:

BHP Group Ltd (ASX: BHP)

This mining giant has made the broker’s list. It currently has an add rating and $48.60 price target on its shares.

The broker believes BHP is a “relatively low risk given its superior diversification relative to its major global mining peers.” In addition to this, its analysts like BHP due to its “attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.”

Newcrest Mining Ltd (ASX: NCM)

If you’re looking for exposure to the gold sector then Newcrest could be the share to buy according to Morgans. It has an add rating and $26.05 price target on its shares.

Morgans believes it could be a good option for investors “looking for gold exposure without development risk.” It also likes the company’s geographic spread, which it expects to provide “some relief from the cost and labour challenges WA focussed companies are currently feeling.”

Santos Ltd (ASX: STO)

Another option in the resources sector to consider is this leading energy producer. Morgans has an add rating and $9.15 price target on its shares.

The broker likes Santos due to the resilience of its growth profile and diversified earnings base, which it believes puts the company in a position “to outperform against a backdrop of a continuing broader sector recovery.”

South32 Ltd (ASX: S32)

Another resources share that makes Morgans’ best ideas list is South32. The broker has an add rating and $5.00 price target on the mining giant’s shares.

It commented: “We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.”

Woodside Petroleum Limited (ASX:WPL)

Finally, Morgans is positive on this energy producer and currently has an add rating and $30.55 price target on its shares. It is a fan of its “transformative” merger with the petroleum assets of BHP and believes it is getting the better end of the deal.

Morgans explained: “We think WPL is clearly getting the better of the deal, with synergies not baked into deal metrics and BHP willing to accept a discount. The deal is transformative, lifting WPL into being a top 10 global E&P with +2 billion barrels of 2P reserves, with EBITDA of US$4.7bnpa and growth options.”

The post Morgans names the best ASX resources shares to buy in February appeared first on The Motley Fool Australia.

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• Own ASX 200 energy shares? Here’s what OPEC’s been up to
• What rising inflation could mean for Newcrest (ASX:NCM) shares
• Here’s why the BHP (ASX:BHP) share price is rebounding in 2022
• 5 things to watch on the ASX 200 on Thursday
• These 3 ASX 200 shares are topping the volume charts on Wednesday

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.

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