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Droneshield Ltd (ASX: DRO) shares have flown between small gains and small losses in morning trade today.

Shares in the ASX drone defence tech company closed on Friday trading for 38.5 cents. At time of writing on Monday, shares are swapping hands for 38.2 cents apiece, down 0.8%. In earlier trade shares were up as much as 3.9%.

For some context, the All Ordinaries Index (ASX: XAO) is up 0.4% at this same time.

Here’s what investors are mulling over today.

What did the tech company announce?

Droneshield shares are in the spotlight after the company reported (in a non-price sensitive announcement) that it has commenced the release of a “major update” across its global fleet of counterdrone (C-UAS) devices.

All devices that carry Droneshield’s artificial intelligence (AI) based drone detection engine, RFAI, will receive the update. Those include portable, vehicle/ship, and fixed site devices.

The company says this will provide “a complete refinement” of the products software and user experience.

Aspects of those upgrades that could impact Droneshield shares in the months ahead include a 25% improvement in emitter detection accuracy and tracking in cases where multiple emitters are present.

The release also noted that the ASX tech company’s DroneLocator detections will now provide horizontal distance to detection, vertical distance to detection, true bearing of detection, and relative bearing of detection.

Commenting on the AI updates that could support Droneshield shares longer-term, CEO Oleg Vornik said, “As drones continue to rapidly evolve, there is an ongoing race to detect and respond to those threats.”

Vornik added:

Firmware upgrades enable our global community of customers to deal with the latest threats, and we actively collaborate with our end users to receive the latest field intelligence to base our algorithms on.

These updates (together with our computervision AI engine and the sensorfusion engine) grow our SaaS subscriber base and are expected to become a major driver of Droneshield revenue over coming years.

Angus Bean, chief technology officer, said, “Droneshield has grown into a global leader in the C-UAS solutions, driven by our cross-disciplinary engineering teams, listening to our end user community and consistently delivering better performance, usability, and reliability.”

How have Droneshield shares been tracking?

Droneshield shares are up 4% over the past full year.

The ASX tech share has gained 13% over the last six months.

The post Buying Droneshield shares? Here’s how the company is harnessing the AI revolution appeared first on The Motley Fool Australia.

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More reading

• Here’s how the ASX 200 market sectors stacked up this week
• The DroneShield share price just clocked a 7-year high. Here’s why
• Why Data#3, Deep Yellow, DroneShield, and Imugene shares are racing higher today
• Why Atlantic Lithium, Charter Hall, Droneshield, and Zip shares are pushing higher
• Guess which small cap ASX stock is jumping 12% after record-breaking year

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has recommended DroneShield. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Lynas Rare Earths Ltd (ASX: LYC) share price is in the red today.

Shares in the S&P/ASX 200 Index (ASX: XJO) rare earths miner closed Friday trading for $5.95. In morning trade on Monday, shares are swapping hands for $5.84 apiece, down 1.9%.

For some context, the ASX 200 is up 0.5% at this same time.

This comes following the release of Lynas’ quarterly update for the three months ending 31 December (Q2 FY 2024).

Here are the highlights.

Lynas share price hit by falling production

The Lynas share price is sliding after the miner reported a 40% year on year fall in rare earths production.

Over the three months Lynas produced 901 tonnes of neodymium and praseodymium (NdPr), down from 1,508 tonnes in Q2 FY 2023.

Total rare earth oxide (REO) production during the quarter came in at 1,566 tonnes, down from 4,457 tonnes in the prior corresponding period.

Investors could also be pressuring the Lynas share price today with quarterly sales revenue coming in at $113 million, down from $233 million year on year. Lynas reported sales receipts of $107 million, down from $168 million in Q2 FY 2023.

However, management noted this slowdown was due to a temporary shutdown for upgrade works at its Lynas Malaysia facility, with production forecast to ramp back up over the coming quarters.

“During the shutdown, the works to modify and increase separation capacity and improve the reliability of cracking and leaching at Lynas Malaysia were successfully and safely completed,” the miner stated.

Lynas now expects production in the March quarter to be around 1,500 tonnes. Production across the six months to June 2024 is forecast to increase slightly from its previous guidance to be in the range of 3,200 to 3,400 tonnes.

NdPr production capacity is expected to increase to approximately 10,500 tonnes a year by December 2024.

The three months also saw Lynas receive a variation for its Lynas Malaysia’s operating licence from the Malaysian government, a variation which boosted the Lynas share price at the time.

This now allows the ASX 200 miner to keep importing and processing Lanthanide Concentrate from its Mt Weld mine in Western Australia. The amended operating licence is valid until 2 March 2026.

As for the balance sheet, as at 31 December, Lynas held cash and short-term deposits of $686 million.

In other news relating to the current quarter, Lynas also reported on the successful completion of its exploratory drilling program at Mt Weld.

Lynas share price snapshot

The Lynas share price has struggled over the past year, down 34%.

Shares remain up 33% over three years.

The post Lynas share price sinks alongside 50% quarterly revenue fall appeared first on The Motley Fool Australia.

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More reading

• How I invest and make money from ASX mining shares
• The 8 ASX mining stocks Goldman Sachs says are buys in 2024
• Brokers name 3 ASX shares to buy now
• Here’s why Lynas shares could rise 33% this year
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX-listed exchange-traded funds (ETFs) can be an effective investment choice for retirement.

An ETF essentially gives us the ability to buy a basket of different shares in just one investment, creating good diversification. You don’t need to worry about which individual stocks to pick for your portfolio.

If I were investing in ASX ETFs for retirement, there are two different investment strategies I’d consider to create good annual cash flow.

ASX ETFs that pay dividends

Plenty of retirees are attracted to individual ASX dividend shares for the dividend yield.

In contrast, many ASX ETFs invest in good businesses that don’t necessarily pay large dividends (or any dividends at all). Blue chip international shares, for example, don’t typically offer a strong dividend yield because they have a lower dividend payout ratio compared to ASX shares.

This is why the Vanguard Australian Shares Index ETF (ASX: VAS) – which invests in 300 of the biggest businesses on the ASX – could be a decent option for dividends. It has a sizeable allocation to names like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA) and Fortescue Ltd (ASX: FMG), all of which produce good dividend yields.

According to Vanguard, the VAS ETF has a dividend yield of 3.8% (excluding franking credits).

Vanguard Australian Shares High Yield ETF (ASX: VHY) takes investing in high-yield stocks to another level. It only invests in high-yield ASX shares. It has 72 holdings, with companies like BHP, CBA, National Australia Bank Ltd (ASX: NAB) and Wesfarmers Ltd (ASX: WES) being the biggest allocations. And it has a dividend yield of 4.9% (excluding franking credits), according to Vanguard.

The one non-ASX-focused ETF I’ll mention is Betashares FTSE 100 ETF (ASX: F100). It invests in 100 of the biggest businesses in the United Kindom’s share market. In this portfolio, we’ve got names like Shell, HSBC, Unilever and GSK. The F100 ETF has a 12-month distribution yield of 3.1%.

What about growth ETFs?

Dividends aren’t the only way to create cash flow.

If someone is in retirement (or thinking about it), I expect they have a sizeable portfolio balance.

Imagine if an investor had $100,000 invested in a growth-focused ASX ETF. If the value of that ETF went up 10%, it’d grow to $110,000 in value. If they sold $5,000, they’d generate a 5% ‘yield’ on that initial $100,000 and be left with $105,000.

In year two, if it rose by 10% again, it’d reach $115,500 – and if we aim for a 5% yield (of $105,000), it would deliver a cash flow of $5,250 and a remaining balance of $110,250.

Of course, no investment is guaranteed to go up over a year or any particular length of time. However, I think a few ASX ETFs have a better chance of delivering strong capital growth than many ASX share-focused ETFs.

If the capital value of the ETF falls one year, that is likely to be okay. It could rebound afterwards in the following year. We regularly see this happen after a bear market. That’s why, in my opinion, it’s good to stick to a sustainable withdrawal ‘yield’ of, say, 4% (or 5% for a strong-performing ASX ETF).

Keep in mind that past performance is not a guarantee of future performance.

Big hitters

Vaneck Morningstar Wide Moat ETF (ASX: MOAT) focuses on United States companies with strong, durable competitive advantages, and those businesses are currently valued at an attractive price (according to Morningstar). Since its inception in June 2015, the MOAT ETF has achieved an average return per annum of 15.5%.

VanEck MSCI International Quality ETF (ASX: QUAL) invests in global shares that have a high return on equity (ROE), low negative earnings variability and low levels of debt. Since the ETF’s inception in October 2014, it has delivered an average return of 15.1% per annum.

These two are the sorts of growth ETFs I’d look at to create cash flow for my own retirement. They offer diversification, a strong investment framework and have a solid track record of long-term success.

The post How I’d create investment cash flow in retirement from ASX ETFs appeared first on The Motley Fool Australia.

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More reading

• Forget term deposits and get rich with ASX shares the Warren Buffett way
• Should ASX growth investors buy the Vanguard Australian Shares Index ETF (VAS)?
• ASX 200 shares: A once-a-decade opportunity to get rich?
• Targeting a $53,000 second income starting with just $1,000 of savings?
• Got $500 to invest in stocks? I’d put it in this ASX ETF

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has positions in Fortescue. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended GSK, HSBC Holdings, and Unilever Plc. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended VanEck Morningstar Wide Moat ETF and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Liontown Resources Ltd (ASX: LTR) shares are having another day to forget on Monday.

In morning trade, the lithium developer’s shares are down 26% to a 52-week low of 88.5 cents.

This means its shares are now down 70% since the start of October.

Why are Liontown shares crashing again?

The catalyst for today’s weakness has been the release of an update on the Kathleen Valley Lithium Project.

Let’s start with the positives. The company revealed that the Kathleen Valley Lithium Project remains on-track for first production in the middle of this calendar year. Management also advised that it remains focused on delivering to that schedule and on budget.

Now let’s see what is putting pressure on Liontown shares today.

According to the release, the material decline in spodumene prices has triggered significant reductions in short and medium-term lithium price forecasts.

As a result, the company has commenced a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital and reduce the near-term funding requirements of the Project. It explains:

The Project Review includes examining options to defer the timing of the previously announced 4 million tonne per annum underground development work, sequencing adjustments to the mine plan, and scope for additional cost optimisations. There is no change to the 3 million tonne per annum plant capacity design which the Company is currently constructing.

Funding blow

Also putting pressure on Liontown shares is news that a recently announced $760 million debt funding package has been terminated due to lithium price weakness.

The company explains:

The finalisation of the debt package has been impacted by recent reductions in the independent forecast pricing for spodumene upon which the lenders’ credit approvals were based. Accordingly, the Company has now commenced discussions on a revised, smaller debt facility that will reflect the Project Review. As a result, the commitment letter announced on 19 October 2023 will terminate.

Liontown had approximately $515 million cash at the end of December, having fully drawn the $300 million project funding package secured from Ford (NYSE: F). This is expected to fund construction activities required for first production in the middle of 2024.

Management expects to make an announcement on its debt funding within the first quarter. It also concluded by reiterating that it “remains confident in the long-term outlook of the lithium market and Kathleen Valley’s status as a Tier 1 long-life producer.”

The post Why are Liontown shares crashing 26% on Monday? appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• Why Ampol, APM, Liontown, and Wildcat shares are dropping today
• Why are Liontown shares crashing 12% today?
• 5 things to watch on the ASX 200 on Thursday
• Copper and lithium: Broker says these ASX mining shares can double in value

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Zip Co Ltd (ASX: ZIP) shares are starting the week with a bang.

In morning trade, the buy now pay later provider’s shares are up 16% to 73.5 cents.

Why are Zip shares jumping?

Investors have been buying the company’s shares this morning after responding positively to the release of a quarterly and half year update.

According to the release, for the second quarter, Zip delivered an 8.5% lift in transaction value over the prior corresponding period to $2.8 billion.

And thanks to a material improvement in its revenue margin to 8.2% (from 7.1%), Zip’s revenue was up 26.1% to $225.6 million for the quarter. This was driven by strong performances across both the Americas and ANZ markets, which reported revenue growth of 35.5% and 20.4%, respectively.

This ultimately supported “outstanding” cash EBTDA during the quarter according to management. Zip’s Group CEO and Managing Director, Cynthia Scott, said:

Zip delivered an outstanding Group cash EBTDA result for the second quarter, underpinned by a particularly strong seasonal performance in US TTV, the resilience of the ANZ business, improved margins and continued cost discipline.

As a result, the company’s group cash EBTDA for the first half of FY 2024 is expected to be between $29 million and $33 million. This compares favourably to a cash EBTDA loss of $33.2 million during the first half of FY 2023.

Another positive potentially given Zip’s shares a boost was its bad debts. It advised that US bad debts continued to perform well with monthly cohort loss rates approximately 1.3% – 1.4% of total transaction value. This is below the target range of 1.5% -to 2.0%. In Australia, net bad debts improved by 54bps quarter on quarter to 3.64% of receivables.

Self-sustaining business

Scott believes that this result demonstrates that Zip is now a self-sustaining business. She adds:

Today’s result reinforces that Zip is delivering as a self-sustaining business. Group revenue grew by 26.1% and revenue margins were 8.2%, up 110bps versus 2Q23. Cash transaction margin improved 70bps versus 2Q23 to 3.5%, demonstrating the strength of the business model in a challenging external environment.

At the end of the period, Zip had $81.3 million in available cash and liquidity, which is an increase from $53.2 million on 30 September 2023.

The post Zip shares rocket 17% on ‘outstanding’ quarter appeared first on The Motley Fool Australia.

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More reading

• Why Atlantic Lithium, Charter Hall, Droneshield, and Zip shares are pushing higher
• Why Arcadium Lithium, IAG, PYC Therapeutics, and Zip shares are falling today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Zip Co. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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TPG Telecom Ltd (ASX: TPG) shares are down 40% from July 2020 and have dropped 22% from August 2022. Are investors underlying this ASX telco share?

This company is responsible for a number of brands including TPG, Vodafone, iiNet, AAPT and others. All these businesses came together after a merger between TPG and Vodafone Australia.

There are a few good factors about the business to keep in mind.

A growing dividend

TPG has grown its annual dividend each year since 2021 when the merged company started paying cash to shareholders.

We can’t control what the TPG share price does, but receiving a growing dividend can offset some of that market uncertainty and share price volatility.

The last 12 months of dividends amount to 18 cents per share, which is a grossed-up dividend yield of around 5%.

TPG’s annual dividend per share in 2024 could be 18.8 cents, which would be a grossed-up dividend yield of 5.2%, according to Commsec. The annual dividend per share could then grow to 20 cents per share in FY25 and 21.4 cents per share in FY26.

For investors that focus on dividends, it looks like an appealing option.

Rising prices and subscribers to help profitability?

Vodafone has recently increased prices, though it reportedly only applies to new customers.

In the first half of FY23, TPG reported that its postpaid average revenue per user (ARPU) rose to $44.6 – this was an increase of 6.2% year over year and a rise of 4.4% half over year. However, the prepaid ARPU dropped to $18.9, which was a year-over-year decline of 2.5% and a drop of 1.6% half-on-half.

Subscriber numbers continue to increase, which I believe helps its underlying profitability. Postpaid subscribers rose 5,000 in the six months of the FY23 first half to 3.23 million, and an increase of 2.2% year over year.

Total prepaid subscribers rose 35,000 half over half, and went up 167,000 year over year, to 2.07 million.

TPG’s fixed costs are essentially, you guessed it, fixed. So, an increase of revenue can help increase the underlying profitability of the business. In HY23, service revenue rose 4.5% to $2.3 billion and the earnings before interest, tax, depreciation and amortisation (EBITDA) grew quicker, going up 12.4% to $941 million. Stronger profit is supportive for the TPG share price.

Profitability can also rise from the company’s ‘simplification’ efforts, which it’s expecting to achieve $140 million per annum of cash benefits.

Investing for growth

The business is putting a lot of money towards capital expenditure, which will hopefully unlock additional earnings in the coming years. Growing the capabilities of its 5G network is a key focus.

With 5G, TPG’s brands (particularly Vodafone) can offer Aussies a 5G-powered wireless home broadband option. NBN currently takes a lot of the broadband margin, but Vodafone customers using 5G wireless broadband would mean TPG gets a lot more margin.

Investing in 5G is important because it will make sure TPG and Vodafone are keeping up with competition.

Foolish takeaway

Things are looking promising for TPG, but it’s not exactly delivering growth that’s shooting the lights out. I think it could be a solid ASX dividend share, but it’s not cheap.

According to Commsec, the TPG share price is valued at 31x FY24’s estimated earnings and 27x FY25’s estimated earnings.

The post Are TPG shares an unloved buying opportunity? appeared first on The Motley Fool Australia.

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More reading

• Zip shares rocket 17% on ‘outstanding’ quarter
• Appen shares crash 37% on huge Google blow
• How I invest and make money from ASX mining shares
• Downgraded: Why Lake Resources shares just lost a bull
• 3 ASX small-cap shares I’d buy for the long-term

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 Tpg Telecom. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Unfortunately, it goes from bad to worse for Appen Ltd (ASX: APX) and its shares on Monday.

The embattled artificial intelligence (AI) data services company has been dealt an almighty blow this morning.

This has led to the Appen share price X.

What’s going on with Appen shares?

Investors have been hitting the sell button today after the company was rocked with the loss of a major customer, Alphabet (NASDAQ: GOOG) subsidiary, Google.

According to the release, as part of a strategic review process, Google will be terminating its global inbound services contract with Appen. This will result in the end of all projects with Appen by 19 March 2024.

Appen stresses that it had no prior knowledge of Google’s decision to terminate the contract.

How big a blow is this?

The release notes that in FY 2023, Appen’s revenue from Google was US$82.8 million at a gross margin of 26%.

As a comparison, the company’s unaudited results for FY 2023, which have been released today, reveals revenue of US$273 million for the year.

This means that Google’s global inbound services contract represents approximately a third of its current revenue. The company commented:

The news is unexpected and disappointing, particularly considering the progress made against Appen’s transformation and performance in November and December 2023.

FY 2023 performance

As mentioned above, Appen released unaudited figures for FY 2023. It expects to report:

• Revenue of US$273 million
• Underlying EBITDA loss of US$20.4 million

Though, as it also alluded to above, management had made some good progress on its earnings during November and December.

For these months, underlying EBITDA was positive at US$3.2 million and US$2.3 million, respectively.

But that progress is somewhat meaningless now that Appen has lost an US$80 million+ contract. Somehow, it will have to find a way to cut costs further to offset this loss and hope that other big customers don’t follow Google to the exits.

If they do, the days of Appen shares remaining on the ASX boards could be numbered.

The post Appen shares crash 37% on huge Google blow appeared first on The Motley Fool Australia.

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More reading

• How I invest and make money from ASX mining shares
• Downgraded: Why Lake Resources shares just lost a bull
• 3 ASX small-cap shares I’d buy for the long-term
• Here’s why these ASX 200 growth shares could be top buys
• The iron ore price is falling, is now a good time to buy Rio Tinto shares?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Appen. The Motley Fool Australia has recommended Alphabet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The mining sector is a fascinating industry full of compelling companies. I think it’s possible to invest in ASX mining shares and make good money. But I’m using a particular investment method to do it.

There are many different mining companies on the stock market, including those producing iron ore, lithium and gold, to name just a few.

Some of the ASX’s best-known companies are miners, such as BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Fortescue Ltd (ASX: FMG), Pilbara Minerals Ltd (ASX: PLS), Northern Star Resources Ltd (ASX: NST) and Newmont Corporation (ASX: NEM).

However, bear in mind that the share prices of mining companies can be highly volatile, particularly when commodity prices move around quite substantially.

Volatility can create an opportunity

When the whole ASX share market drops during a bear market, there are loads of opportunities to find oversold stocks.

Sometimes ASX mining shares can go through a painful decline, even when the overall market is stable.

No one can forecast with certainty when a commodity price will fall, which is why the profit and share prices of mining companies can be so unpredictable.

The investment advice of “buy low, sell high” is essentially how I approach my investments in ASX mining shares.

I buy when the market sentiment is weak, and the outlook is worrying. I haven’t sold any of my resource shares yet, but if I were looking to sell, I’d endeavour to do it when the commodity price is relatively strong.

The types of investments I like

For example, I’ve invested in Fortescue shares quite a few times when the iron ore price was below US$100 per tonne, and there were worries about the Chinese real estate and construction sector. Buying at that low level unlocked a large dividend yield, and I’m (currently) sitting on good capital gains.

Just over a year ago, when copper prices were weaker, I was looking at Sandfire Resources Ltd (ASX: SFR) as a clear opportunity because of its heavy share price decline (at the time) and exposure to the long-term decarbonisation tailwind.

I’ve been wrong plenty of times about ASX mining shares, and I may end up being wrong about my investment in Pilbara Minerals.

But, it seems to me that if investors can be brave and choose good miners at a time when the outlook for the commodity price is weak for the foreseeable future, that may be the most opportunistic time to buy.

I’m most optimistic about copper miners because of the decarbonisation tailwind.

I’d be interested in BHP and Rio Tinto because of their growing copper exposure, but iron ore prices remain high, so I am willing to be patient.

Lynas Rare Earths Ltd (ASX: LYC) is an interesting one to me because of its share price decline, but its commodities are still integral to the global economy.

ASX lithium shares are a mixed bag. The lithium price has sunk, yet lithium demand is expected to keep rising. I chose Pilbara Minerals in the sector because it’s already producing lithium, it has big plans for growth, and its balance sheet is strong.

I believe volatility can be our friend as long as we’re willing to be brave to buy and don’t get too greedy when it comes to selling at a certain price.

The post How I invest and make money from ASX mining shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue and Pilbara Minerals. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been a very tough 12 months for Lake Resources N.L. (ASX: LKE) shares.

Since this time in 2023, the lithium developer’s shares have lost 88% of their value.

Is this a buying opportunity? Let’s see what analysts at Bell Potter are saying about the company following a review of the lithium industry.

Are Lake Resources shares a buy?

Unfortunately for shareholders, after having a speculative buy rating on its shares for some time, the broker has now downgraded them and taken an axe to its valuation.

According to the note, its analysts have downgraded Lake Resources shares to a speculative hold rating with a 12 cents price target (from 25 cents previously).

While this still implies reasonably large upside potential of 20%, the broker doesn’t appear to believe it is sufficient to warrant a more positive rating.

The broker revealed that the downgrade was made largely on the back of lower lithium price expectations. It said:

Our lower long term lithium carbonate price outlook has materially reduced our LKE valuation to $0.12/sh (previously $0.25/sh). […] For 2024, we estimate spodumene concentrate (SC6) prices averaging US$1,100/t (previously US$2,500/t) and lithium carbonate prices US$16,250/t (previously US$30,000/t).

It is worth noting that the broker still sees a lot of potential in the lithium developer. It also appears to see the company as a good M&A target due to the Kachi project’s large scale. It adds:

Key to LKE’s success over 2024 will be maintaining tension with respect to financing and offtake, amid a weak lithium market. In parallel, FEED and permitting will continue. The Kachi project’s large scale and DLE technology selection does potentially make LKE a strategically important company over the long term in terms of technology selection and new supply. DLE brings ESG benefits including less land disturbance and water consumption.

The post Downgraded: Why Lake Resources shares just lost a bull appeared first on The Motley Fool Australia.

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ASX small-cap shares typically have a lot of growth potential, which can deliver over the long term. It’s easier for a small company to double in size than a large business, for example.

While the S&P/ASX 200 Index (ASX: XJO) has a strong focus on ASX bank and mining shares, small-cap shares can provide diversification to different industries that are not necessarily in blue-chip territory.

A small business isn’t guaranteed to do well, but I do like the prospects for the three names below.

Lindsay Australia Ltd (ASX: LAU)

Lindsay has a market capitalisation of $332 million, according to the ASX.

It describes itself as an integrated transport, logistics and rural supply company and a “leading national service provider” to the agriculture, horticulture and food-related industries.

A key part of the offering is that it can help farmers grow, package, transport and distribute their produce throughout Australia and the world.

The Commsec forecast suggests the business could grow its earnings per share (EPS) in FY24, FY25 and FY26. Those numbers put the current Lindsay share price at under 8x FY24’s estimated earnings.

Lindsay’s revenue has steadily grown since FY18, and it’s investing in a number of projects that could help future profitability. These include new software services, property upgrades and expansions underway in Melbourne and plans being finalised for Adelaide and Perth.

The mid-point of the company’s guidance of $105 million for FY24 would represent an increase of 16% compared to FY16.

Duxton Water Ltd (ASX: D2O)

Duxton Water is a company that owns a portfolio of Australian water entitlements which are leased to farmers on long-term and short-term leases. It has a market cap of around $230 million, according to the ASX.

The value of water entitlements has increased over the long term. We all need to eat food, and water is a key part of that food production. I think this ASX small-cap share is a good way to indirectly gain exposure to agriculture.

Duxton Water generates a pleasing amount of lease income each year, and this enables it to pay a steadily growing dividend.

The company is benefiting from the growing amount of water-hungry crops that are being planted, such as almonds.

I think the right time to invest is when there is a lot of rain because water entitlement values may go down (or at least see slower growth).

The Duxton Water share price is currently at a 52-week low, and I think this is the right time to invest.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is the leading retailer of baby and toddler-related products. Think of things like prams, car seats, clothes, toys, furniture, blankets and so on. It has a market cap of roughly $245 million, according to the ASX.

The Baby Bunting share price has sunk 30% in the last year, and it’s down 70% since April 2021.

I think this much lower valuation is attractive, considering it still has a large and expanding Australian store network and a growing presence in New Zealand. The ASX small-cap share is also working on its digital sales, including its new marketplace offering.

As at 8 October 2023, total sales in FY24 had fallen 3.3%. The FY24 first quarter gross profit increased by 70 basis points year over year, and its administration costs were reduced by $1.7 million year over year.

According to the projection on Commsec, the Baby Bunting share price is valued at 10x FY25’s estimated earnings with a possible grossed-up dividend yield of 10% for that year.

If it can get back to sales growth, I believe the business can kickstart a recovery in earnings and market confidence.

The post 3 ASX small-cap shares I’d buy for the long-term appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Duxton Water. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lindsay Australia. The Motley Fool Australia has recommended Lindsay Australia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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