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US markets tumbled on Wednesday, putting the spotlight on S&P/ASX 200 Index (ASX: XJO) tech shares for Thursday’s session. As most of Australia slept, the Nasdaq Composite fell 1.66% while the S&P 500 Index dropped 0.82%.

The slip followed the release of data that showed US inflation hit a 30-year high in October.

Over the 12 months ended October, the US’s consumer price index increased 6.3%. The index measures how prices for goods and services change month-to-month.

According to reporting by the Wall Street Journal, the initial impact of the data saw the price of stocks drop and that of bonds bolster.

Which stocks dragged on the US market overnight?

Nasdaq

The biggest weights on the Nasdaq Composite include the Moderna Inc (NASDAQ: MRNA) share price, which fell 3.33%.

That of Amazon.com, Inc. (NASDAQ: AMZN) also dropped 2.63% while the newly re-branded Meta Platforms Inc (NASDAQ: FB) share price dipped 2.3%.

Interestingly, the Tesla Inc (NASDAQ: TLSA) share price slightly recovered from its earlier 16% plunge. It gained 4.34% on Wednesday.

S&P 500

Weighing on the S&P 500 were the share prices of Ford Motor Company (NYSE: F), Nike Inc (NYSE: NKE), and Twitter Inc (NYSE: TWTR).

They fell 3.7%, 3.1%, and 2.5% respectively.

ASX 200 tech shares in focus

The dip in US markets might make for an interesting day on the ASX. Particularly, since ASX 200 tech shares tend to trend in line with their Nasdaq-listed peers.

One of the obvious share prices to keep an eye on is that of Afterpay Ltd (ASX: APT). The buy now, pay later company’s suitor, Square Inc (NYSE: SQ) saw its share price drop 1.55% overnight.

Both the Xero Limited (ASX: XRO) and Nuix Ltd (ASX: NXL) share prices could also be in for a big session on Thursday.

The 2 ASX 200 tech shares have already struggled this week. They’ve both fallen 4% since Friday’s close.

The post ASX 200 tech shares in focus as Nasdaq plunges 1.7% appeared first on The Motley Fool Australia.

More reading

• Xero (ASX:XRO) share price on watch after delivering strong first half growth
• 5 things to watch on the ASX 200 on Thursday
• Why Afterpay, Immutep, Pushpay, and Vulcan shares are falling
• Why Amazon stock was moving higher on Tuesday
• Are these 2 beaten-up ASX tech shares now bargain buys?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Meta Platforms, Inc., Square, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nuix Pty Ltd. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO and Xero. The Motley Fool Australia has recommended Amazon, Meta Platforms, Inc., and Nike. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Westpac Banking Corp (ASX: WBC) share price has come under significant pressure in November

Since releasing its full year results on the first of the month, the banking giant’s shares have shed almost 12% of their value.

Broker lifts target on Westpac share price

Despite the bank’s full year result and its net interest margin outlook falling short of the market’s expectations, one leading broker remains positive on the Westpac share price.

In fact, at a time when many brokers were downgrading Westpac’s shares or their price targets, the team at Morgans bumped its price target higher.

According to the note, the broker has retained its add rating and lifted its price target on the company’s shares by 3.4% to $30.50.

Based on the latest Westpac share price, this implies potential upside of 34% for investors over the next 12 months.

And if you include the $1.23 per share fully franked dividend that Morgans is forecasting in FY 2022, the total potential return stretches to approximately 40%.

What did the broker say?

Morgans was pleased with Westpac’s performance and while it was disappointed with its margin outlook, it is looking beyond this and focusing more on its valuation, cost cutting plans, and future share buybacks.

It commented: “Westpac Banking Corp has posted FY21 cash earnings which are 2.2% better than our expectation. The beat is largely the result of a larger credit loss provision release than we expected, more than offsetting a very soft net interest margin outcome. A $3.5bn off-market share buyback has been announced. We expect another $3.5bn off-market share buyback in FY23F.”

“We find the management of the margin-volume tradeoff in Australian home lending in FY21 to be disappointing and we hope for better management of this tradeoff going forward. Having said this, our view has been that the stock was not being priced for perfection and was offering considerable value. While the NIM has now re-based notably lower, we continue to see considerable value in the stock particularly due to our expectation of significant cost out by FY24F,” it added.

Morgans concluded: “Although we have downgraded our cash EPS forecasts, our target price has increased with the introduction of FY24 forecasts, by which year we are forecasting WBC’s annual cost base to reduce to $8.25bn (compared with $10.2bn in FY20) and the return on tangible equity (ROTE) to rise to 14.8%.”

All in all, the broker appears to believe this could make the Westpac share price a bargain buy today.

The post Morgans just bumped up its target for the Westpac (ASX:WBC) share price. Here’s why appeared first on The Motley Fool Australia.

More reading

• How does the CBA share price performance stack up against the other big banks?
• 2 buy-rated ASX dividend shares with big yields
• Why is the Westpac (ASX:WBC) share price outperforming on Monday?
• These were the worst performing ASX 200 shares last week
• Why is the Westpac (ASX:WBC) share price sinking again today?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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Silence.

A deep, heavy silence after more than four years of almost constant warfare.

For many, perhaps most, on the front lines, there was no jubilation. No joy.

Just relief.

The clock had struck 11am, on November 11, 1918.

The armistice, negotiated between the two sides of The Great War, came into effect.

The artillery ceased. The fighting stopped.

It was finally over.

As the RSL’s description reads:

“At 11.00 am on 11 November 1918 the guns fell silent as hostilities ceased on the Western Front, ending four years of death and destruction. Earlier that day, at 5.00 am, the Germans signed an armistice in a railway carriage at Compiègne. In the following year, the Treaty of Versailles made the cease-fire permanent.”

Thereafter, November 11 became Armistice Day — the day on which Commonwealth countries remembered those who had served, and died, in The Great War.

Tragically, it wouldn’t be the war to end all wars, as they hoped.

And so, Armistice Day was subsequently named Remembrance Day, and became a day to remember those who served, suffered and died in all wars.

While ANZAC Day has become Australia’s primary day of commemoration, we also pause to reflect on Remembrance Day.

Every year, at 11am on the 11th day of the 11th month — today —  a minute’s silence is observed in their memory.

A few years ago, I had the solemn privilege of visiting some of the battlefields and cemeteries on the Western Front.

The ground still bears some of the scars of war. And the Flanders poppies still grow.

The words of the Canadian serviceman and poet, John McCrae, came immediately to mind:

In Flanders Fields, the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie,
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
 If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

Today, at 11am, I will observe a minute’s silence.

In remembrance of those who served in our Australia’s name, and in the armed services of her allies.

In remembrance of those who suffered then, and those who still suffer now.

In remembrance of those who did not return.

It is a personal choice, of course. But I would encourage you to do the same.

They shall grow not old, as we that are left grow old

Age shall not weary them, nor the years condemn.

At the going down of the sun, and in the morning.

We will remember them.

Lest We Forget.

The post We will remember them appeared first on The Motley Fool Australia.

More reading

• Morgans just bumped up its target for the Westpac (ASX:WBC) share price. Here’s why
• Xero (ASX:XRO) share price on watch after delivering strong first half growth
• 2 unloved ASX shares ready to skyrocket
• Citi tips Wesfarmers (ASX:WES) share price to dip 16% following API deal
• How does the CBA share price performance stack up against the other big banks?

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The Xero Limited (ASX: XRO) share price will be one to watch today.

This follows the release of the cloud accounting company’s half year results.

Xero share price on watch after reporting further strong growth

• Operating revenue up 23% to NZ$505.7 million (26% in constant currency)
• Annualised monthly recurring revenue (AMRR) grew 29% to NZ$1,132 million
• Total subscribers increased 23% to 3.0 million
• Total subscriber lifetime value (LTV) growth of 61% to NZ$9.9 billion
• Free cash flow down to NZ$6.4 million from NZ$54.3 million
• Gross margin increased by 1.4 percentage points to 87.1%
• EBITDA down 19% to NZ$98.1 million

What happened during the half?

For the six months ended 30 September, Xero reported a 23% increase in operating revenue to NZ$505.7 million. This was underpinned by a 23% lift in subscribers to 3 million and improvements in its average revenue per user (ARPU) and churn. This ultimately helped drive its AMRR beyond NZ$1 billion for the first time.

The Australia segment was once again a key driver of Xero’s growth during the half. Australian revenue increased 22% to NZ$224.9 million following the addition of 124,000 net subscribers. This brought its total to 1.24 subscribers in the country.

Things were positive in New Zealand, with revenue increasing 13% to NZ$72 million. Xero added 34,000 net subscribers to reach a total of 480,000 subscribers. Management was pleased with this performance, noting that delivering double digit subscriber growth in a market where cloud adoption is relatively high points positively to the potential of other markets.

Over in the UK, Xero’s revenue increased by a solid 24% to NZ$132.8 million following the addition of 65,000 net subscribers. This took total subscribers in the UK to 785,000. While deadlines for the implementation of Making Tax Digital (MTD) in the UK for income tax were deferred, Xero continues to invest in readiness for upcoming phases of MTD. These changes are expected to impact millions of UK small businesses.

One slight disappointment was the performance of Xero’s North America segment. It delivered revenue growth of just 5% (or 14% in constant currency) to NZ$30.1 million. Xero added 23,000 net subscribers to reach a total of 308,000 subscribers. Management advised that it continues to focus on developing the partner channel in North America and signed with a number of US and Canadian accounting firms to make Xero a preferred solution for their practices.

Finally, the Rest of World (ROW) segment performed strongly, reporting revenue growth of 72% to NZ$45.9 million. This segment was boosted by the first time inclusion of Planday and a 26,000 net increase in subscribers to 201,000. Xero notes that it continues to see strong progress within Xero’s South Africa business which is scaling a large base of subscribers. Singapore has also continued to be a strong performer within ROW.

LOCATE acquisition

Xero has continued its acquisition spree by announcing a deal to acquire LOCATE Inventory.

LOCATE is a US cloud-based inventory management provide which better supports the inventory needs of small business and enhances ecommerce capability.

The acquisition will embed LOCATE’s inventory and ecommerce talent and capability within Xero to enhance its inventory management offering. Management expects this to help meet increased small business demand for inventory and cash flow management tools.

Total consideration for the purchase and subsequent employee incentive payments will be US$19 million. Transaction, integration and operating costs are expected to have a minimal impact on Xero’s FY 2022 EBITDA.

Outlook

Xero plans to continue to focus on growing its global small business platform and maintain a preference for reinvesting cash generated, subject to investment criteria and market conditions, to drive long-term shareholder value.

While no sales or earnings guidance was given for the full year, management provided investors with an idea of its spending plans.

It commented: “Total operating expenses (excluding acquisition integration costs) as a percentage of operating revenue for FY22 are expected to be in a range of 80-85% which is consistent with levels seen in the second half of FY21 and the pre-pandemic period. Integration costs, relating to all the acquisitions announced since the start of FY21, are expected to increase total operating expenses as a percentage of operating revenue by up to 2% for FY22.”

The Xero share price is trading flat in 2021.

The post Xero (ASX:XRO) share price on watch after delivering strong first half growth appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 10 top ASX shares to buy in November
• Which tech shares are dragging down the ASX 200 on Friday?
• Could the Xero (ASX:XRO) share price be a quality buy?
• 3 explosive ASX tech shares to buy in November

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

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Fidelity International portfolio manager Kate Howitt reveals the 2 ASX shares to buy at the moment.

Hottest ASX shares

The Motley Fool: What are the 2 best stock buys right now?

Kate Howitt: The two I came up with were Evolution Mining Ltd (ASX: EVN) and Synlait Milk Ltd (ASX: SM1).

Evolution is a gold company. I put this in the category of buying umbrellas when it’s not raining. Gold is one of those things that goes in and out of fashion kind of with how worried the investment community is. And when the investment community is worried, the gold price goes up and the gold stocks go on a tear and you sit there looking, thinking why don’t I own more gold? 

Buy umbrellas when it’s not raining — buy gold when people are confident about the world and gold stocks are unloved, which is pretty much where they are now.

The big shift that came out of the pandemic is that every government in the world got comfortable with doing a lot of fiscal support. Even parties like our own Coalition, which is based on being the party of economic fiscal responsibility, turned the taps on. And that’s going to be really hard to reverse.

That kind of generalised increase in money supply historically has always led to inflation, currency debasement, and in those environments, gold does well. So Evolution is a great operator in the Australian scene. They’ve proven themselves to be very, very good operators.

MF: I’m a long-suffering shareholder of A2 Milk Company Ltd (ASX: A2M), so please tell me a bit about Synlait.

KH: I think part of the argument for Synlait is it’s diversified beyond A2. [Until now] it’s kind of been seen as a derivative of A2 — A2 goes up, it goes up; A2 goes down, it goes down. 

Ironically, it’s been even worse for Synlait because they recognised the need to diversify away from A2. So they made some large investments in building new facilities. And they’re kind of at the point of maximum financial stretch on those, but they haven’t got the new non-A2 client volumes coming through those yet. 

Then just while they’re going through that process of stretching their own balance sheet to give them some further growth, they had this collapse in A2’s volumes, on both the English language and the China label. 

So they had excess supply that didn’t go to A2, they had put that through to ingredients. The ingredients are lower margin, and it’s sold in US dollars, not New Zealand dollars. So then the currency moved against them. It was almost a perfect storm.

They’ve gone through that now, and the market is just saying the China infant formula trade is over — there’ll never be any more growth. We think they will be great — A2 is not their only client even for infant formula, they’re diversifying beyond dairy. 

So we think there’s a potential, the kind of turnaround and bottoming that you’ve seen from Blackmores Limited (ASX: BKL) when it was very unloved, it was tied to old brands that no one was ever going to buy again.

Well, we’ve seen that, with a good management team, that company has started its turnaround process, and we think Synlait is going to follow in that direction.

The post 2 unloved ASX shares ready to skyrocket appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Why API, Evolution, Flight Centre, and Sydney Airport shares are pushing higher
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Tony Yoo owns shares of A2 Milk. 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 Blackmores Limited. 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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The Wesfarmers Ltd (ASX: WES) share price has been a positive performer in 2021.

Since the start of the year, the conglomerate’s shares have risen 16% to $59.84.

Investors may now be wondering where next for the Wesfarmers share price, particularly given the recent announcement of the acquisition of Australian Pharmaceutical Industries Ltd (ASX: API).

Is the Wesfarmers share price heading higher?

Unfortunately for shareholders, one leading broker doesn’t expect the acquisition of the Priceline pharmacy chain operator to lift Wesfarmers’ shares.

In fact, the team at Citi believes the company’s shares can still tumble meaningfully despite this agreement.

According to a note from this week, the broker has retained its sell rating but lifted their price target slightly to $50.00.

Based on the current Wesfarmers share price, this implies potential downside of over 16% for the company’s shares.

What did the broker say?

While Citi expects the deal to give Wesfarmers’ earnings a small boost, it isn’t enough for a more positive rating.

Citi continues to believe that the Wesfarmers share price is overvalued based on current multiples.

It commented: “Wesfarmers has entered a scheme implementation deed with API at a $1.55 per share acquisition price, net of dividends declared. The transaction is set to be completed by first quarter calendar year 2022, subject to shareholder, court and ACCC approval. Given Sigma has dropped their bid and the relatively lower concern over competition regarding a Wesfarmers owned API, we view the transaction as likely to go ahead and therefore factor the new business into our model for Wesfarmers.”

“Contribution from API is expected to lift EPS by ~1.5% from FY22e onwards with no synergies expected. We lift our Target Price by 2% to $50.00 per share but remain Sell rated on valuation basis. At 27.9x FY23e earnings, Wesfarmers is trading on ~15% premium to the market ex-resources,” it concluded.

The post Citi tips Wesfarmers (ASX:WES) share price to dip 16% following API deal appeared first on The Motley Fool Australia.

More reading

• Why API, Evolution, Flight Centre, and Sydney Airport shares are pushing higher
• ASX 200 (ASX:XJO) midday update: Sydney Airport agrees to takeover, Wesfarmers’ strikes API deal
• API (ASX:API) share price higher after accepting Wesfarmers takeover offer
• Wesfarmers (ASX:WES) share price rises on API takeover deal
• Wesfarmers (ASX:WES) share price lifts as rival drops out of race for API

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers 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 Goodman Group (ASX: GMG) share price has risen by around 24%. Can the e-commerce boom continue to help the business?

In-fact, Goodman shares have gone up by around 14% in the last month alone.

Many brokers believe that the business is still a buy, despite its strong run up of value. For example, Credit Suisse thinks it’s a buy with a price target of $25.01.

The brokers at Macquarie Group Ltd (ASX: MQG) believe that Goodman is a buy with a price target of $26.45.

Morgan Stanley thinks it’s a buy with a price target of $26.50 for the Goodman share price.

All of those brokers recently updated their thoughts on the real estate giant after the latest quarterly update from Goodman.

Financial strength and growth in FY22 Q1

Goodman said that at 30 September 2021, its total assets under management (AUM) had grown to $62 billion.

The business experienced 3.2% like for like net property income (NPI) growth in its managed partnerships. The occupancy across the partnerships was 98.4%. The development pipeline of work in progress (WIP) had grown to $12.7 billion.

Goodman noted that COVID-related disruptions in FY22 have been managed so that they have had less impact on the full year projections than initially assumed.

In addition, given the strength of its development projects, leasing success and the stronger-than-expected performance of its partnerships, the outlook for FY22 is ahead of previous forecasts.

It’s now expecting operating earnings per share (EPS) growth to be more than 15%.

E-commerce boom

Goodman made a number of observations that explained why it is seeing such a strong operating environment, which may be helping the Goodman share price.

The real estate business said that well-located industrial real estate is recognised as essential infrastructure for the digital economy and making it a highly sought-after asset class. Recent market transactions and strong demand is driving asset values higher. Combined with “significant” rental growth, this is expected to support further valuation growth similar to FY21.

By June 2022, Goodman is expecting its AUM to rise to around $70 billion. Investors often like to think about the upcoming financial year when considering the Goodman share price.

The business also said that the significant level of customer demand, combined with supply restrictions in its markets, is creating a shortage of available space. It’s focusing on infill markets, to deliver sustainable opportunities for customers and investors, while securing cashflow growth for the long-term.

The boss of Goodman, Greg Goodman, said:

The results of the deliberate positioning of our portfolio over the last decade to adapt to and leverage the changes in the digital economy, are now being realised. Customer demand for high-quality properties close to consumers has never been greater.

High utilisation of space, barriers to entry and limited supply in our markets are underpinning occupancy and cash flow growth in our portfolio, with strong rental growth occurring globally…We remain focused on regeneration of existing land and buildings in our portfolio, supporting future development work and reducing our impact on the environment.

The value added to our properties through intensification of use, and strong investor appetite for logistics real estate will drive further positive revaluation outcomes in FY22.

Valuation of the Goodman share price

Using Morgan Stanley’s estimates, Goodman is valued at 32x FY22’s estimated earnings.

The post Can the e-commerce boom keep helping the Goodman (ASX:GMG) share price? appeared first on The Motley Fool Australia.

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• Top brokers name 3 ASX shares to buy today

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 owns shares of and 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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Commonwealth Bank of Australia (ASX: CBA) has enjoyed a strong run over the past year.

Atop a big leap in the CBA share price in the last 12 months, the bank also pays a trailing dividend yield of 3.18% fully franked.

But how has CommBank performed compared to its 3 biggest peers?

How has the CBA share price performed compared to its peers?

You won’t find shareholders complaining about CommBank’s performance over the past 12 months. Or at least, you shouldn’t!

In fact, the CBA share price gains sit right at the top the leader board when compared to the other 3 dominant Aussie banks.

Over the past 12 months, CommBank shares have gained 50.6%.

National Australia Bank Ltd (ASX: NAB) comes in number 2. The NAB share price is up 41.9% since this time last year. NAB pays a trailing dividend yield of 3.11%.

Coming in at number 3 is Australia and New Zealand Banking Group Ltd (ASX: ANZ). ANZ shares have gained 38.9% over 12 months. The bank pays a trailing dividend yield of 3.65%.

And at number 4, with a still respectable 22.4% share price gain, is Westpac Banking Corp (ASX: WBC). And Westpac easily leads its competitors when it comes to dividends, with a trailing dividend yield of 6.52%.

CBA’s share price gain tops the board. But it’s worth noting that all big 4 banks outperformed the 17% gain posted by the S&P/ASX 200 Index (ASX: XJO) over this same period. And that’s without including their dividends.

Is CommBank still good value?

Following an almost 51% increase in the CBA share price over the past full year, investors may be wondering if the bank still presents good value.

The answer to that question varies depending on who you ask.

While there are a few bearish brokers and analysts reporting on CommBank, Kardinia Capital’s portfolio manager Kristiaan Rehder is not among them.

In an interview with The Motely Fool (which will be published in its entirety next week), Rehder said:

CBA has had strong core volumes growth, which is being maintained.

It’s really dominating in the home lending and the retail deposit market. It has very strong overall net interest margins, with high asset quality. The capitalisation rate is undeniable. We believe that CBA remains the highest quality name in the banking sector.

The post How does the CBA share price performance stack up against the other big banks? appeared first on The Motley Fool Australia.

More reading

• Why does NAB’s (ASX:NAB) CEO want house prices to fall?
• Here are the top 10 ASX shares today
• Race to the top: These 3 ASX shares all smashed new 52-week highs today
• Looking for crypto investing advice? Why your financial adviser’s lips may be sealed
• NAB (ASX:NAB) share price lifts as CEO calls for mortgage buffers to stem soaring house prices

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 Zip Co. Ltd (ASX: Z1P) share price has dropped by more than 12% over the last month. Could it be a buy now, or should investors wait until later?

Zip shares are actually 31% lower than the peak of the last six months of $8.78 in July 2021.

What do brokers think of the Zip share price?

Despite the heavy decline, some analysts remain bearish on the BNPL business.

For example, analysts at both Macquarie Group Ltd (ASX: MQG) and UBS rate Zip as a sell, with price targets of $5.40 and $5.70 respectively.

UBS notes the recent negative that regulators are now thinking that it would be a good idea if merchants are able to add BNPL fees onto the costs for consumers, if that merchant wants to.

However, the broker Morgans has a much more positive outlook on the business. This broker rates Zip as a buy, with a price target of $8.56 on the Zip share price. The broker was thinking about Zip’s recent quarterly update as well as the potential growth over the coming years.

Zip’s quarterly update

The buy now, pay later business reported a high level of growth in the first quarter of FY22.

It said that it achieved record group quarterly revenue of $136.8 million, an increase of 89% year on year. The transaction volume growth was 101% year on year to $1.9 billion.

This growth was helped by the 82% growth of customer numbers year on year to 8 million. Merchants on the platform went up by 71% to 55,200.

Profitability margins

Zip said that it has maintained market leading buy now, pay later margins with revenue as a percentage of total transaction value (TTV) at 7%.

Looking at the cash transaction margin in FY21, this reduced by 40 basis points from 3.8% in FY20 to 3.4% in FY21.

However, in the first quarter of FY22, the arrears increased. Arrears are accounts that have been delinquent for more than 60 days. At 30 September 2020, arrears were 0.9%. This had risen to 1.87% at 30 September 2021.

Profitability can be a key area that investors look at when deciding what to value the Zip share price.

International growth

Zip continues to make moves to expand globally.

For example, it has entered into an agreement with Microsoft to integrate Zip’s instalment payment technology into the shopping experience within the Microsoft Edge web browser.

Zip has also continued its global expansion strategy with a move to India with a strategic investment in ZestMoney. ZestMoney is one the largest and fasting-growing BNPL platforms in India, with over 11 million registered users and more than 10,000 online merchants.

The buy now, pay later business also said that Zip Mexico is now live and processing transactions. It recently signed Claro Shop, one of the largest online marketplaces in Mexico.

Zip Canada also continues to grow, with Canadian consumers shopping through Zip’s large US merchants.

Another broker thought on the Zip share price

There are a range of opinions on Zip shares. One rating is ‘neutral’ by Citi, though it still has a price target of $7.40 on the company. The broker notes that growth is slowing, but arrears are rising.

Zip management believe that re-investing for growth will generate the greatest value for shareholders over the long-term.

The post Is the Zip (ASX:Z1P) share price a buy now, or wait for later? appeared first on The Motley Fool Australia.

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• Zip (ASX:Z1P) CEO: ‘We’d be very, very profitable, but we’re reinvesting for growth’
• Why is the Bendigo Bank (ASX:BEN) share price having such a tough time of late?
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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. owns shares of and has recommended ZIPCOLTD FPO. The Motley Fool Australia owns shares of and 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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As almost all investors would be aware of, the past few years have given Australian property investors unprecedented returns. Anyone who currently owns a property has likely seen it go up in value over the past year, and by quite a large margin too.

But with years of double-digit growth rates under the belt, many investors are wondering where to from here? Well, one ASX CEO has a fairly decisive view about what will, or should, happen next.

According to recent reporting in the Australian Financial Review (AFR), CEO of National Australia Bank Ltd (ASX: NAB) Ross McEwan has told investors that “we can’t afford” property prices to keep going up, lest we find ourselves in a similar house price crisis:

We cannot see another 20 per cent house price growth over the next 12 months. We cannot afford to have that happen in the Australian marketplace.

NAB CEO says ‘we can’t afford houses to keep rising’

The report finds that Sydney property prices have risen by a staggering 25% over just the past 12 months, mostly due to interest rates being at the record low of 0.1%. But Mr McEwan doesn’t think lifting rates is the answer to cooling the property market. He backs the Reserve Bank of Australia’s decision not to raise rates until economic conditions improve and wage growth picks up.

Instead, McEwan reckons the “fairest and most effective way” to pump the housing market brakes is for the Australian Prudential Regulation Authority (APRA) to “double the rise in the serviceability buffer” for new loans.

The serviceability buffer is the gap between the mortgage interest rate a property owner is offered on their loan and a predetermined ‘buffer’ that the bank uses to assess the lendee’s ability to service the loan should rates rise.

On 31 October, APRA raised this buffer to 3%, meaning that if a customer gets a mortgage at an interest rate of 2%, the bank will assess their ability to service the loan at a 5% interest rate.

“They could always move that again,” Mr McEwan said of the serviceability buffer. “My view, and discussions with the regulator, have been that it is the simplest way to have an impact.”

So it seems Mr McEwan is cheering on a fall in house prices. That might make him both very popular and very unpopular with different demographics of Australian society.

The post Why does NAB’s (ASX:NAB) CEO want house prices to fall? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX shares today
• Race to the top: These 3 ASX shares all smashed new 52-week highs today
• NAB (ASX:NAB) share price lifts as CEO calls for mortgage buffers to stem soaring house prices
• Why Chalice Mining, Life360, Kogan, and NAB shares are storming higher
• These 3 ASX shares have just been named as broker buys

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank 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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