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Australia has officially reopened and the flying kangaroo is already hitting tarmac across the globe. Does that mean Qantas Airways Limited (ASX: QAN), and its share price, is in for a strong run in the near future?

Well, maybe, but maybe not. Motley Fool Australia analyst Benny Ou sat down with our chief investment officer Scott Phillips to discuss the pros and cons of investing in Qantas earlier this month.

Interested readers can find the pair’s conversation in full here and more content from The Motley Fool Australia on our YouTube channel. Or, keep reading for a breakdown of Ou and Phillips’ conversation on Qantas.

At the time of writing, the Qantas share price is $5.17, down 2.17%.

The bull view on Qantas shares

After plunging around 60% at the height of the COVID-19 pandemic, the Qantas share price has taken off towards recovery.

As Ou points out, Qantas navigated the pandemic relatively well. It also has a strong brand, is recognisable, and generally liked by customers

Additionally, now the worst of the pandemic is seemingly behind us, Qantas has emerged a leaner organisation than it was before.

Qantas has cut costs and plans to cut more. It has also bolstered its balance sheet with an $802 million land sale.

The airline also has a wild card in its back pocket. The company’s Frequent Flyer loyalty program has continued to grow throughout COVID-19. Ou commented:

This division makes money by selling airline loyalty points to your banks, your retail partners, utility providers, and airlines… But what’s interesting is that, prior to the pandemic, in 2019 the loyalty division actually generated more in underlying earnings than [Qantas’] international segment…

I think it will likely rebound and become the crown jewel of the business.

On top of that, Ou notes Qantas has a hold of around 70% of Australia’s domestic flight capacity and Australians, in general, have more cash to splash post-COVID than they did pre-COVID.  

He said Australia’s household savings ratio is just below 10%, compared to its pre-pandemic levels of around 5% to 6%.

And finally, in what could be seen as both a good and a bad sign, Qantas’ market capitalisation is currently sitting near its record high.

The potential downside to investing in Qantas

Unfortunately, there are several factors Ou pointed to that could weigh on Qantas shares in the future.  

Firstly, the airline is subject to a plethora of external factors that could affect its profitability.

COVID-19 is one example. Others include geopolitical risks, terrorism, natural disasters, and – perhaps most notable – oil and fuel prices. Ou stated:

Its financial performance is actually strongly exposed to, but also strongly dictated by, commodity prices, and what you’ve probably been seeing in the news is rising jet fuel prices or rising Brent oil prices…

I think, if these prices remain elevated… Qantas has to either fork out more and absorb the costs or they might actually charge customers via higher fares, which I think is a very, very difficult balancing act.

There is also emerging competition in Australia’s domestic market.

Regional Express Holdings Ltd (ASX: REX) has recently crept into Australia’s ‘golden triangle’, offering daily flights between Melbourne, Sydney, and Brisbane. Meanwhile, budget domestic airline Bonza is planning to launch in 2022.

More competition could put pricing pressure on Qantas.

Speaking of pricing, Qantas doesn’t have much power over it. Ou said:

As an airline, [Qantas] has limited to no pricing power. And what i mean by that is that a lot of the pricing and costs are dictated by the airports, as well as the changes in demand from consumer and business travel.

To top off his bearish argument, Ou noted the travel industry could take longer to recover than potentially expected:

In my personal view, I think global aviation will actually take years to fully recover…

Despite the pent-up demand that we’re seeing, I think people will likely have a more of a wait-and-see approach and I think the rebuilding of confidence to travel internationally will take some time.

So, will Qantas be a market beater?

Unfortunately, Ou is bearish on the Qantas share price over the next 5 or so years.

He noted that, currently, the Qantas share price seems to be driven by sentiment. Investors appear to be assuming it will increase once travel returns to normal.

Additionally, while the company’s share price remains lower than it was pre-COVID, the company has more outstanding shares. Thus, Qantas’ market capitalisation has already seemingly recovered.

Finally, Ou looked to Qantas’ past performance:

Historically, Qantas has been extremely unpredictable. It’s actually lost money [in] 3 out of [the last] 10 ten years on an operating basis…

Over the last 5 years of Qantas in pre-COVID levels, it was actually profitable between 2015 to 2019, and if we take the average earnings then you’re getting around $1.3 billion in underlying earnings during that period. If you deduct or adjust your interest and tax you get around $800 million. So, you’re kind of looking at around 14 times net profit after tax, which doesn’t seem quite attractive…

Overall, I think that it will [lag] the index and I think there are better opportunities out there that have a higher chance of beating the market.

The opinions expressed in this article were Phillips and Ou’s as at November 2021 and may change over time.

The post Are Qantas (ASX:QAN) shares a top reopening buy? Here’s what Motley Fool analyst Benny Ou thinks appeared first on The Motley Fool Australia.

More reading

• Qantas (ASX:QAN) share price down 5% so far this week despite boss spruiking ‘new opportunities’
• Is the Qantas (ASX:QAN) share price still a good recovery buy?
• Is the reopening already priced into ASX 200 travel shares?
• Here’s why ASX 200 travel shares are getting hammered today
• Here’s why Qantas (ASX:QAN) is not having such a ‘Bonza’ day

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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If you’re looking for exposure to the resources sector, then BHP Group Ltd (ASX: BHP) shares could be the way to do it.

This is because the team at Morgans see plenty of upside for the BHP share price and big dividends in the near future.

What did Morgans say about the BHP share price?

According to a note from this week, the broker has retained its add rating but trimmed its price target on the mining giant’s shares slightly to $45.70.

Based on the current BHP share price of $38.62, this implies potential upside of over 18% for investors.

It gets even better, with Morgans forecasting a fully franked dividend of $3.40 per share in FY 2022. This represents a yield of 8.8%, bringing the total return on offer here to approximately 27%.

Why is Morgans bullish?

Morgans notes that BHP has signed a share sale agreement with Woodside Petroleum Limited (ASX: WPL), with the proposal to merge their two petroleum businesses now binding.

This is just one of a number of big moves BHP has made in recent years, which Morgans believes supports the view that Mike Henry was appointed for his vision, not just his operational chops. It notes that BHP has moved decisively to exit coal (ex-BMA) and oil and gas, while pushing ahead with the construction of Jansen (potash).

And while the broker highlights that these are strategic exits from some difficult commodities, the divestments have blunted BHP’s growth profile and reduced diversification. As a result, Morgans believes BHP will soon add to its operations through acquisitions.

It commented: “We do not think this is the last move, and expect BHP to continue to move its portfolio to add further base metal growth options. As a base case we expect more acquisitions of development-ready copper/nickel projects (like Norront Resources), while we see more aggressive M&A of existing miners also a realistic scenario.”

Overall, the broker sees plenty to be positive about and continues to rate its shares highly.

Morgans concluded: “We see BHP as best placed to take advantage of current varying commodity cycles and maintain our Add recommendation.”

The post Is the BHP (ASX:BHP) share price great value today? appeared first on The Motley Fool Australia.

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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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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.

Cryptocurrency assets are flashing signs of weakness in the latter half of November, with the market’s total valuation dropping around 10% to $2.5 trillion in the last 15 days. But the sector’s long-term outlook is still strong as investors look for an alternative to fiat currencies amid rising inflation and low interest rates in developed economies.

Let’s explore how Ethereum (CRYPTO: ETH) and Aave (CRYPTO: AAVE) can benefit from these favorable long-term trends. 

1. Ethereum 

Ethereum is the first blockchain network designed to create self-executing programs called decentralized applications (dApps). These dApps expand the potential of cryptocurrency outside of just storing and transmitting value. With a first-mover advantage and scalability upgrades on the horizon, Ethereum is still an excellent bet for investors. 

In a loosely regulated industry like cryptocurrency, trust is everything. And Ethereum’s six-year history and $500 billion market cap (20% of the entire market) make it the crypto equivalent of a blue-chip company. This brand recognition helps it stay relevant, even as rivals like Solana (capable of handling 50,000 transactions per second, compared to Ethereum’s 15) surpass it in scalability.

But Ethereum isn’t resting on its laurels. Its blockchain aims to transition from its current proof-of-work (miners solve puzzles to verify transactions) to a proof-of-stake (PoS) system wherein transactions are verified using existing tokens. Ethereum founder Vitalik Buterin claims that the upgrades, dubbed Ethereum 2.0, could send the network’s transaction capacity as high as 100,000 per second.

It is unclear when Ethereum 2.0 will go live, but the developers are making progress. In October, the network completed its Altair update, which is designed to help introduce a PoS system.

2. Aave

Unlike Ethereum, which is an independent blockchain, Aave is a dApp programmed on Ethereum. It offers crypto-related financial services without a centralized intermediary. And it looks poised for long-term success because of its utility for cryptocurrency investors. 

Passive income is hard to find in this economy. According to the FDIC, the average annual percentage yield (APY) on savings accounts is just 0.06%. And many public companies prefer to reinvest their profits or repurchase shares instead of paying a meaningful dividend. This lack of generous yields creates an opportunity for Aave, allowing users to earn interest (undertaking exchange-rate risk) on their cryptocurrency holdings by lending them to other users through liquidity pools — a “bank” of digital assets from which the borrowers can draw.

Aave’s deposit yields can hit double digits for less-liquid assets. But popular stablecoins (cryptocurrencies pegged to fiat currency) like DAI and Gemini Dollar boast APYs of 2% to 3%. As an Ethereum-based dApp, Aave faces the same challenges as Ethereum with transaction capacity and fees. But investors should expect the platform to get a boost as the Ethereum 2.0 upgrades go live. 

Investing for the long term 

Cryptocurrencies are notoriously volatile. But Ethereum and Aave look likely to outperform over the long term because of their strong fundamentals. In addition, both assets have early-mover advantages and will benefit from the Ethereum 2.0 upgrades, making them top choices for investors will a long-term horizon. 

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

The post 2 top cryptocurrencies to buy and hold forever appeared first on The Motley Fool Australia.

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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There’s still value in the Tuas Ltd (ASX: TUA) share price even after its circa 50% rally over the past two months.

The ASX-listed telco won’t be on the radar of many retail investors following its spin-off from TPG Telecom Ltd (ASX: TPG).

It feels like Tuas has popped out from nowhere as attention has been focused on the Telstra Corporation Ltd (ASX: TLS) share price, which rallied to a four-year high yesterday.

Tuas share price galloping like the dark horse

The lack of broker coverage on Tuas compared to the other two telcos is one reason why Tuas is in investors’ blind spot.

For this reason, it probably also escaped the attention of many that the Tuas share price has outperformed Telstra by a country black spot mile.

While the Telstra share price has jumped 36% since the start of 2021, the Singapore mobile operator has more than doubled in value.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) is sitting on gains of 11% over the period.

Betting on David Teoh’s magic touch

But those in the know see further upside for the Tuas share price. The portfolio manager at Wilson Asset Management, Tobias Yao, is one such supporter, reported Livewire.

“It’s a buy for us. David Teoh is one of the most astute and successful businessmen around, having founded TPG Telecom,” said Yao.

“The reason we like TPG Singapore is the fact that we think the value offering is very, very attractive.”

Perfect demographic for the Tuas share price

One of the key selling points is Singapore’s large migrant worker population. Singapore heavily depends on foreigners to work in construction as labourers and as live-in maids.

These consumers favour low-cost pre-paid mobile plans, and that’s something David Teoh knows a lot about.

“We think that David Teoh and the team can continue to grow TPG Singapore and continue to gain market share over there and potentially expand into other parts of Southeast Asia,” added Yao.

Expansion into Asia just starting

Arden Jennings from Ausbil Investment Management also told Livewire that he likes the Tuas share price.

“It’s not one that we own, but I think it’s actually a buy after doing some work on it. We need to still do some more work, but I think I might have talked myself into buying it,” he said.

“They’re the fourth largest telco in Singapore with the opportunity to expand into Malaysia. And with a reopening of economies, this low-cost telco could really benefit.”

The post Experts say Tuas (ASX:TUA) share price is a buy even after its 50% surge appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau owns shares of TPG Telecom Limited, Telstra Corporation Limited, and Tuas 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 shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom 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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Are you interested in adding some ASX growth shares to your portfolio? If you are, you may want to look at the ones listed below that have recently been named as buys by the team at Morgan Stanley.

Here’s what you need to know about them:

Life360 Inc (ASX: 360)

The first ASX growth share that Morgan Stanley is positive on is Life360. It is the growing technology company responsible for the eponymous Life360 mobile app. This market leading app is for families and offers useful features such as communications, driver safety, and location sharing. As of its last update, Life360 had grown its user base to a massive 32 million. This is generating significant recurring revenue and, most importantly, opens the door to material cross selling and upselling opportunities. Particularly given its recent acquisitions of wearables company Jiobit and items tracking company Tile.

Morgan Stanley is bullish the company’s future. It currently has an overweight rating and $16.50 price target on its shares.

Symbio Holdings Limited (ASX: SYM)

Another ASX growth share that the broker is positive on is Symbio (previously known as MNF Group). Symbio develops and operates a global communications network and software suite that allows some of the world’s leading tech innovators to deliver new-generation communications solutions. This includes giants such as Google, Twilio, and Zoom. Symbio appears well-placed for growth over the long term thanks to favourable tailwinds and its expansion across Asia. It is also sitting on a sizeable cash balance following an asset divestment. This gives management opportunities to bolster its growth through M&A activities.

The broker currently has an overweight rating and $7.30 price target on Symbio’s shares.

Temple & Webster Group Ltd (ASX: TPW)

A final ASX growth share the broker is bullish on is Temple & Webster. It is an online furniture and homewares retailer which has really caught the eye in recent years. Thanks to its strong market position and the ongoing shift to online shopping, Temple & Webster has been growing its sales and operating earnings at a rapid rate. For example, in FY 2021 the company revealed an 85% increase in revenue to $326.3 million and a 141% jump in EBITDA to $20.5 million. The good news is that Temple & Webster still has a long runway for growth over the next decade as more and more category sales shift online.

Morgan Stanley has an overweight rating and $16.00 price target on Temple & Webster’s shares.

The post Morgan Stanley rates these 3 ASX growth shares as buys appeared first on The Motley Fool Australia.

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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. owns shares of and has recommended Life360, Inc., MNF Group Limited, and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended Temple & Webster Group 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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S&P/ASX 200 Index (ASX: XJO) shares could be a good place to find dividend income opportunities.

There are more blue chips out there capable of paying big dividends than just Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Telstra Corporation Ltd (ASX: TLS).

Some ASX 200 dividend shares are expecting long-term profit growth and dividend increases:

APA Group (ASX: APA)

APA is a large gas pipeline owner. It’s currently rated as a buy by Morgans, with a price target of $9.98.

Morgans is attracted to the fact that APA has contracts that are linked to CPI inflation, and this means the current high levels of inflation can help the business.

APA has grown its distribution every year for the last decade and a half, driven by growing operating cashflow as more energy projects come online.

In FY22, the ASX 200 dividend share is expecting to grow its distribution by another 3.9% to 53 cents per security. At the current APA share price, that translates into a distribution yield of 5.5%. Morgans expects the distribution per unit to increase again in FY23 to $0.55 per security.

APA recently bought some debt of Basslink, which owns and operates the 370km high voltage direct current electricity interconnector between Victoria and Tasmania. It provides two-way access to 500MW of electricity and is “critical” to the export of Tasmania renewable energy to Australia’s mainland. APA wants to buy Basslink.

The energy infrastructure business wants to expand its electricity transmission footprint and invest in renewable energy sources. The business sees many billions of dollars of opportunities to invest in Australia (and the US) in electricity transmission and renewable energy generation in the future.

APA has said there is potential for its existing pipelines to be repurposed for hydrogen (fully or blended). This can future-proof the ASX 200 dividend share’s assets.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a large fund manager that is listed on the ASX.

It’s currently rated as a buy by the brokers at Macquarie Group Ltd (ASX: MQG).

Excluding the performance fee dividend, Magellan’s ordinary dividend continues to rise. By FY23, Macquarie is expecting Magellan’s annual dividend to rise to $2.40 per share. That would translate to a partially franked dividend yield of 7%.

Whilst underperformance of its global equity strategy has led to negative sentiment, Macquarie thinks the dividend yield and cheaper price/earnings ratio makes it seem attractive.

On Macquarie’s numbers, the Magellan share price is valued at 13x FY23’s estimated earnings.

The ASX 200 dividend share reported that its total funds under management (FUM) increased by $1.5 billion to $114.8 billion in October 2021.

Magellan is also feeling confident about some of its external investments including Guzman y Gomez and Barrenjoey.

GYG is a quick service Mexican food chain with global operations across Australia, Singapore, Japan and the US. It had 158 restaurants at the last count with plans for 30 in the next year alone.

Barrenjoey is a new local investment bank which is already profitable, with revenue tracking ahead of expectations. Magellan said it is “highly likely that Barrenjoey will become very valuable to Magellan over time.”

The post 2 ASX 200 shares with strong dividend income prospects appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison owns shares of Magellan Financial Group. 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 shares of and has recommended APA Group and Telstra Corporation Limited. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australian share market may be charging higher in 2021, but not all shares have been able to follow suit.

The two ASX shares listed below have been beaten down this year. Is this a buying opportunity for investors?

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price has been among the worst performers this year with a decline of 47%. This has of course been driven by a significant deterioration in the infant formula company’s performance.

One leading broker that is sticking with the company is Bell Potter. It recently retained its buy rating and $7.70 price target on the company’s shares. Based on the current A2 Milk share price, this implies potential upside of 25% for investors.

Bell Potter was pleased with A2 Milk’s recent investor update and the targets that management has set over the medium term.

It commented: “A2M have indicated a medium term target of ~$2.0Bn in revenue with a target margin in the teens. A margin of low-mid 20’s would be achievable longer-term, subject to a higher EL [English label] recovery and market share gains. The revenue targets compares to our FY24e target of ~$1.6Bn and so is a fairly material uplift if achieved.”

It also sees a lot of value in management’s plan to double its market share in China through an expansion in mother and baby stores (MBS) distribution from 23.8k stores to 30k-35k stores.

“In our view the runway to expanding MBS channels is achievable when viewed in the context of competitors and based on average sales rates by A2M and competitors, achieving the distribution expansion alone would add NZ$200-400m in revenue. As such we do not see the PRC label target as particularly aggressive,” it added.

All in all, the broker appears to see the weakness in the A2 Milk share price this year as a buying opportunity for investors.

Bravura Solutions Ltd (ASX: BVS)

The Bravura share price is down 18% since the start of the year. While this is disappointing, the team at Goldman Sachs believe it could be a buying opportunity for investors.

This week the broker reiterated its buy rating and $3.70 price target on the wealth management technology company’s shares. This implies potential upside of 39% from the current Bravura share price.

Goldman notes that the company is very well positioned to deliver growth into FY 2022 and beyond. This is due to its healthy pipeline in key markets, a shift to consumption-based contracts, acquisitions, and the evolution of the Australian superannuation market.

In respect to the latter, the broker said: “BVS expects the evolution of this market will provide significant opportunities for Sonata Alta and Digital Advice, addressing client needs including a seamless digital experience, ongoing changes in regulation and pressure to increase operational efficiency. In our view this dynamic could see further contracts with large superannuation funds, similar to the Aware Super contract.”

Overall, with the tide now turning, Goldman appears to believe investors should be jumping on board before it’s too late.

The post Are A2 Milk (ASX:A2M) and this beaten down share bargain buys? appeared first on The Motley Fool Australia.

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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. owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia has recommended A2 Milk. 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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There are some ASX growth shares that are both promising and seeing very quick growth.

Businesses that are growing quickly may be able to achieve attractive returns for investors thanks to compound growth over several years.

Just because a business is growing doesn’t automatically make it worth owning. However, these could be promising:

Bubs Australia Ltd (ASX: BUB)

Bubs is an infant formula business that specialises in goat milk products for both children and adults. It also has organic grass fed cow milk infant formula, plus a range of vitamin supplements and organic baby food.

It’s currently rated as a buy by the broker Citi, with a price target of $0.58. The broker notes that the evidence of a corporate daigou recovery is positive. Bubs could continue to expand into other areas, such as more countries.

The first quarter of FY22 saw total gross revenue rise to $18.5 million, which was up 96% year on year and 45% quarter on quarter. Both its infant formula and adult goat milk powder saw triple digit year on year growth and more than 60% growth quarter on quarter.

The ASX growth share said there has been a strong rebound in its China-facing business, with 156% revenue growth year on year and 98% quarter on quarter growth. The infant formula daigou sales increased 648% year on year and 265% quarter on quarter.

Management said that the transformation reflects the collaboration with its strategic partners to execute its new integrated channel growth strategy. It has restructured its value chain to deliver higher channel margins and rebalanced the channel inventory to meet stabilised demand.

It’s planning more global growth, with entities and representation now established in New Zealand, China and North America. The first shipment of Aussie Bubs products arrived in the USA during the quarter and Bubs is now an official Walmart vendor, with the first online sales expected to be realised in October 2021.

International gross revenue outside of China was up almost five-fold year on year in the first quarter, and was up 35% quarter on quarter.

Bubs was cashflow positive in the first quarter.

City Chic Collective Ltd (ASX: CCX)

City Chic is a global retailer of clothes for plus-size women. It’s rated as a buy by a few different brokers, including Macquarie Group Ltd (ASX: MQG). The price target is $7.50 with its ongoing growth and expansion into new areas.

The ASX growth share has used an acquisition strategy to grow its business significantly over the last couple of years. It’s also growing organically quickly.

Whilst there are supply chain and labour effects from COVID-19, City Chic has built a “strong” inventory position ahead of Christmas. It doesn’t foresee any material stock shortages.

Online sales continue to grow and profit margins increased in FY21. In the last financial year, sales grew by 32.9% to $258.9 million, whilst underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 50.8% and underlying net profit after tax jumped 80.6% to $24.9 million.

The business continues to look to launch new product lines in some of its markets and City Chic is planning to grow its presence in the EU with the Navabi acquisition.

Macquarie puts the City Chic share price at 31x FY23’s estimated earnings.

The post 2 promising and rapidly growing ASX growth shares appeared first on The Motley Fool Australia.

More reading

• ASX retail shares in focus as CBA forecasts bumper Black Friday weekend
• 3 retail ASX shares to buy right now: experts
• What turned the Bubs share price sour on Wednesday?
• Why Afterpay, City Chic, EML, and Nickel Mines shares are pushing higher
• Why Bubs, Dalrymple Bay, IAG, and Redbubble shares are dropping

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 BUBS AUST FPO and Macquarie 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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Are you interested in gaining exposure to the tech sector? If you are, then you may want to check out the two ASX shares listed below.

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

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first tech share to look at is actually an ETF that allows you to invest in a number of tech companies. The BetaShares Global Cybersecurity ETF gives investors exposure to the leading companies in the growing cybersecurity sector.

Included in the fund are global cybersecurity players Accenture, Cisco, Cloudflare, Crowdstrike, Okta, Palo Alto Networks, and Splunk. These companies appear well-placed for growth over the 2020s due to increasing demand for cybersecurity services.

In respect to Palo Alto Networks, it is the global leader in cybersecurity solutions. Palo Alto Networks’ services include advanced firewalls and cloud-based products that extend firewalls to cover other aspects of security. It has over 85,000 customers across over 150 countries. From these customers it generated a 25% increase in revenue to US$4.3 billion in FY 2021.

Zip Co Ltd (ASX: Z1P)

Another ASX share to look at is Zip. It is of course one of the world’s leading buy now pay later (BNPL) providers with operations on several continents.

Zip has been growing at a strong rate over the last few years thanks to the increasing popularity of the payment method and its international expansion. This strong form has continued in FY 2022, with Zip revealing record quarterly revenue of $136.8 million during the first quarter. This was up 89% year on year and 8% quarter on quarter.

The good news is the company still has a very long runway for growth over the next decade thanks to its massive global market opportunity. There has also been speculation that it could be a takeover target if the BNPL industry consolidates.

The team at Morgans is positive on Zip’s outlook and believes its shares are very cheap in comparison to peers. The broker currently has an add rating and $8.56 price target on its shares.

The post Why Zip (ASX:Z1P) and this ASX tech share could be buys appeared first on The Motley Fool Australia.

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• Are Zip (ASX:Z1P) shares a buy? Some pros and cons from Motley Fool analyst Kate Lee
• Does the lower Zip Co (ASX:Z1P) share price make it a takeover target?
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• Why Magnis, Nanosonics, WiseTech, and Zip shares are dropping

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended BETA CYBER ETF UNITS and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended BETA CYBER ETF UNITS. 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 Adore Beauty Group Ltd (ASX: ABY) share price is rated as a buy with expectations of attractive capital growth over the next 12 months.

For readers that don’t know what Adore Beauty is, it’s an e-commerce ASX share that sells many thousands of different products from hundreds of brands.

But what’s what it does. What do analysts currently think of the business?

Broker ratings on the Adore Beauty share price

Both UBS and Morgan Stanley both rate the online beauty business as a buy.

Interestingly, both of them have a price target of $6 on the company. That’s a potential upside of around 40% over the next year, if both brokers are right.

Both brokers note the continuing high level of revenue growth that the company saw in the first quarter of FY22 as well as active customer growth. Both brokers are expecting Adore Beauty to report double digit sales growth for the whole of the 2022 financial year even though lockdowns have ended.

FY22 first quarter update and initiatives

In the first three months of the new financial year, Adore Beauty saw revenue growth of 25% year on year to $63.8 million. Active customers increased 24% to 874,000. Management pointed to strong customer retention, with returning customer growth of 63% year on year.

The business is working on a number of strategic initiatives including scaling its mobile app, building owned marketing channels and community, whilst expanding its loyalty program.

In terms of connecting with its customer base, Adore Beauty’s Beauty IQ podcast surpassed 3 million downloads, the bite-sized beauty podcast was launched and multiple sold-out virtual loyalty events were hosted. Its first private label brand is on track to launch in the third quarter of FY22.

The e-commerce opportunity

One of the things that may be influencing the Adore Beauty share price is the company’s prospects. Management say that the company has a large and growing addressable market, operating within Australia’s $11.2 billion beauty and personal care category. Online sales only represent 11.4% of the total market.

While the market is growing at a compound annual growth rate (CAGR) of 3.8%, online growth is growing much quicker, with a forecast CAGR of 26% between now and 2024. Adore Beauty has a 13% market share of the online market.

Adore Beauty says it has a loyal and highly engaged customer base. Each year a customer remains on the platform, they become more valuable, increasing both their order frequency and basket size.

The company also says that it’s benefiting from structural tailwinds, including the accelerated shift to digital channels and the impact of new digitally native millennial and Gen Z consumers entering the market. Those consumers are continuing to increase their purchases.

Globally, the business is seeing accelerated growth in segments of the market where Adore Beauty is particularly strong, including skincare, which is its biggest category.

Adore Beauty share price valuation

The company is expecting its earnings before interest, tax, depreciation and amortisation (EBITDA) margin to remain between 2% to 4% in the shorter-term whilst it reinvests to continue to grow at a fast pace.

In the longer-term, scale benefits should lead to operating leverage and deliver EBITDA margin according to management.

Due to the high level of investing, brokers aren’t expecting much profit in the next couple of financial years.

According to Morgan Stanley, Adore Beauty shares are valued at 86x FY23’s estimated earnings.

The post Why analysts think the Adore Beauty (ASX:ABY) share price has 40% upside appeared first on The Motley Fool Australia.

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• 3 top ASX shares named as buys
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• Analysts name 2 ASX growth shares to buy
• 2 top ASX growth shares that might be worth buying

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 recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty 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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