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The Marley Spoon AG (ASX: MMM) share price is tanking. The massive price drop comes after the meal kit subscription service gave an update for the September quarter.

At the time of writing, shares in the company are trading for $1.04 – down 31.1%. Earlier, shares hit an intraday and 52-week low of 99 cents per share, which is a 34.4% pummelling.

Let’s take a closer look at the news.

Why the Marley Spoon share price is in freefall

The Marley Spoon share price is heading south and it comes after the company’s Q3 FY21 update, released after the market closed yesterday.

What is seemingly spooking investors is the downward revision of its full-year net revenue. The company blames “volatile consumer behaviour” for the downward growth rate of only 26-28% as opposed to the previously advised 30-35%.

Specifically, the company says “staffing challenges, higher labour rates, and food cost inflation are continuing to impact contribution margin”. This is in addition to “extensive” summer holidays from Europeans enjoying leisure activities after months of lockdown. Apparently, this resulted in “higher skip rates and lower acquisition volume”.

As well, Marley Spoon advised revenue grew 14% on the prior corresponding period (pcp) to 79.2 million Euros ($112.8 million) and a total cash position of 33 million Euros ($51.1 million) – up 17% on the pcp.

Compared with net revenue from its H1 21 update – which grew 38% — this is a massive downgrade in growth projections.

Management commentary

Commenting on the update likely driving down the Marley Spoon share price, CEO Fabian Siegal said:

Q3 net revenue growth is broadly in line with our expectations and an acceleration vs. the last quarter. Nevertheless, volatile customer behaviour during the Northern Hemisphere summer resulted in higher-than-normal skip rates and a higher cost acquisition environment. In order to maintain attractive unit economics, we reduced customer acquisitions, which will impact Q4 and therefore require us to revise our 2021 net revenue growth to 26-28%.

We have since seen a recovery in base behaviour and improved customer acquisition costs. Given these factors, Q4 net revenue growth is trending higher than Q3 2021 and the PCP. The overall structural growth trend for online groceries remains intact and gives us confidence that we will continue to sustain high growth rates at attractive unit economics.

In Q4 we expect continued revenue growth and expanded margins to lead to a significantly lower level of operating EBITDA [earnings before interest, taxes, depreciation, and amortisation] losses vs. Q3.

Marley Spoon share price snapshot

Over the past 12 months, the Marley Spoon share price has crashed by around 60%. Year-to-date it is down by a similar percentage.

Marley Spoon has a market capitalisation of approximately $302 million.

The post Marley Spoon (ASX:MMM) share price crashes 34% to new 52-week low appeared first on The Motley Fool Australia.

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• These were the 5 worst performing ASX shares in September

Motley Fool contributor Marc Sidarous 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 Marley Spoon AG. The Motley Fool Australia owns shares of and has recommended Marley Spoon AG. 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 Pointerra Ltd (ASX: 3DP) share price is rallying on Friday after the company released a sales update for the September quarter.

Third quarter highlights

Pointerra recapped a strong September quarter following the addition of new customers and increased spending from existing customers across key target sectors.

The company reported a September quarter annual contract value (ACV) of US$1.9 million, or a 19% increase against the June quarter. Total ACV as at 29 October now sits at US$11.7 million.

Pointerra was pleased to highlight a step change in its sales mix from being dominated by the US utilities and mapping sectors to a broader adoption across most target sectors. The target sectors being Survey & Mapping, Architecture, Engineering and Construction (AEC) industries, utilities, oil & gas, transport as well as mining across the United States and Australia.

The company believes this also reflects its investment in new business development and sales resources, focused outside of utilities and mapping sectors.

Pointerra noted that its quarter-on-quarter cash receipts might vary as customers are onboarded with different payment cycles including multi-year in advance agreements.

Pointerra share price snapshot

The Pointerra share price posted some extraordinary gains between June 2020 and February this year, surging more than 2,000% from a mere 4 cents to all-time highs of 92.5 cents.

After hitting an all-time high of 92.5 cents on 15 February, the Pointerra share price has trended lower, hitting lows of 35 cents by late August.

Encouraging announcements such as its 14 September corporate presentation helped drive some life back into its share price, hitting a 3-month high of 58 cents shortly after.

However, the move to the upside was shortly met with selling pressure, sliding to the mid-low 40 cent level by October.

The Pointerra share price is down 18% year-to-date.

The post Pointerra (ASX:3DP) share price stalls after September quarter update appeared first on The Motley Fool Australia.

More reading

• What’s happening with the Pointerra (ASX:3DP) share price today?

Motley Fool contributor Kerry Sun 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 Pointerra Limited. The Motley Fool Australia has recommended Pointerra 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 Red Dirt Metals Ltd (ASX: RDT) share price is soaring today following strong assay results at the Mt Ida Project in Western Australia.

At the time of writing, the mining exploration company’s shares are up 10.45% to 74 cents.

However, the Red Dirt share price reached an intraday high of 84 cents shortly after the market open and this was a dramatic 25% jump on yesterday’s closing price of 67 cents.

What are the results?

Red Dirt reported assay results for a drill hole that had been previously drilled by La Mancha Resources in 2006.

Surprisingly, the pegmatite interval was never cut or analysed until being submitted for analysis by Red Dirt. Lithium bearing minerals were identified in the drill core, which led to samples being taken.

As such, the assay results confirmed the high-grade potential for lithium-caesium-tantalum (LCT) bearing pegmatites.

Red Dirt highlighted the following:

• 21.7 metres at 2.11% of lithium oxide
• 302 parts per million (ppm) of Tantalum pentoxide
• 0.49% of iron oxide from 250.7 metres.

One ppm is equivalent to 1 milligram of a chemical or contaminate per litre of water (mg/l) or 1 milligram.

A drilling campaign is now underway at Mt Ida. targeting 25,000 metres of reverse circulation (RC) and 7,000 metres of diamond drilling.

Diamond drilling is a more efficient way of achieving precise sampling and analysis. RC drilling is used for extracting bulk samples. RC drilling is faster but diamond drilling delivers more accuracy in the results.

Red Dirt CEO Matthew Boyes commented:

These assay results confirm the potential the Mt Ida system has of hosting very high-grade lithium-caesium-tantalum (LCT) bearing pegmatites in a system that’s relatively unexplored to date for this style of mineralisation.

Walk up drill targets under existing known pegmatite outcrops will be initially focused on in the run into Christmas and will help our team build up a better understanding of the structural controls and orientation of these pegmatitic bodies.

About the Red Dirt share price

Over the past 12 months, Red Dirt shares have accelerated by 198%. A sharp rise began in September 2021.

Red Dirt commands a market capitalisation of about 97 million, with approximately 145 million shares outstanding.

The post Red Dirt (ASX:RDT) share price leaps 25% on assay results appeared first on The Motley Fool Australia.

More reading

• Why is the Red Dirt (ASX:RDT) share price down 14% this week?
• The Red Dirt Metals (ASX:RDT) share price just hit an all-time high. Here’s why
• Why is the Red Dirt Metals (ASX:RDT) share price soaring 19% today?

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

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The JB Hi-Fi Limited (ASX: JBH) share price is outpacing its peers today after a leading broker upgraded its shares.

Shares in the ASX retailer jumped 3.3% to $50.04 in morning trade. This makes it the fifth best performer on the S&P/ASX 200 Index (Index:^AXJO).

The JB Hi-Fi share price is also beating its rivals. The Super Retail Group Ltd (ASX: SUL) share price added 0.4%, Harvey Norman Holdings Limited (ASX: HVN) share price inched up 0.2%, and Wesfarmers Ltd (ASX: WES) share price fell 0.5%.

JB Hi-Fi share price upgraded despite sales drop

The outperformance of JB Hi-Fi coincided with Macquarie Group Ltd’s (ASX: MQG) decision to upgrade the shares to “outperform” from “neutral”.

The broker’s renewed enthusiasm for its ASX shares comes even after JB Hi-Fi reported a drop in first quarter sales.

The sales decline was due to the lockdowns in Victoria and New South Wales – it’s two largest markets. This meant that more than half of JB Hi-Fi and The Good Guys stores had to shutter.

Emerging signs of a sales rebound

But the news isn’t quite as bad as the headline figure might suggest.

“JBH Aus comp sales for 1Q are tracking -7.9% below pcp, but substantially above pre-COVID levels, +17.3% on a 2yr basis,” said Macquarie.

“Importantly, comp sales have improved since the last update to 15-Aug.”

JB Hi-Fi Australian stores saw a 1.1% decline in sales in the second half of the quarter. This compares with a close to 15% drop between 1 July to 15 August.

Big uplift in electronics purchases

What’s more, Macquarie’s proprietary credit card spending data provides an additional reason to get excited about the JB Hi-Fi share price.

“Purchases through consumer electronics retailers across the Macquarie Credit Card dataset have rebounded sharply over September and October,” noted the broker.

“Kitchen Appliances also look to have rebounded, which bodes well for The Good Guys.”

Good news for Christmas shopping season

Further, the easing of lockdown restrictions in NSW and Victoria will likely give Christmas shopping season a boost.

Given that international travel still looks like a risky affair, stuck-at-home consumers will have extra cash to spend on material items too.

How much is the JB Hi-Fi share price worth?

However, Macquarie warns of a few risk factors that could derail its bullish thesis. Supply chain disruptions that have caused a shortage of stock could negatively impact on the retailer.

There is also uncertainty on whether consumers will keep snapping up electronic products in the next phase of the COVID-19 pandemic.

Macquarie’s 12-month price target on the JB Hi-Fi share price is $52.50 a share.

The post JB Hi-Fi (ASX:JBH) share price jumps on broker upgrade appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday
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• Here are the top 10 ASX shares today
• These 3 ASX 200 shares are topping the volume charts this Thursday
• Why Aussie Broadband, BlueBet, Hipages, and JB Hi-Fi shares are rising

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of and has recommended Harvey Norman Holdings Ltd., Macquarie Group Limited, Super Retail Group Limited, and 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 Adairs Ltd (ASX: ADH) share price has dropped by around 24% since the middle of June 2021. Why is this happening?

Adairs is one of the country’s largest retailers of homewares and furnishings. It sells its products through both stores and online.

Why has the Adairs share price fallen?

Only the buyers and sellers of Adairs truly know why they traded at a lower price compared to a few months ago.

It may or may not be a coincidence that the Adairs share price started falling close to the date when Sydney started experiencing an outbreak of the Delta variant of COVID-19 which led to months of lockdowns and store closures in Sydney and subsequently Melbourne.

The first time the market got a trading update was when the company revealed its FY21 result.

At the time, it said that in the first seven weeks of FY22, like for like sales (excluding the closed stores) were up 5.2% on FY21 and up 50.5% on FY20. However, total group sales for the first seven weeks were 11.7% lower than FY21 due to the COVID-related store closures. In dollar terms, after seven weeks its total group sales were approximately $7 million behind the prior year because of the store closures. Store sales were down 27%. However, Adairs online sales were up 12.9% and Mocka sales were up 16.1%.

What’s the situation now?

The Adairs share price is close to the lowest it has been over the past six months.

It was only last week that the company gave a trading update at its annual general meeting (AGM).  

Sales somewhat improved in the following weeks. Adairs said that for the first 16 weeks of FY22, total sales were down 8.5%, though like for like sales were up 8.2%. The company attributed the decline to the widespread store closures in NSW, Victoria, the ACT and Auckland, which reduced the number of store trading days by around 47%. But those store closures are now coming to an end.

Adairs store sales were down 27.3%. Even the open stores saw a decline of 3.8%. However, Adairs online sales rose by 15% and Mocka sales grew by 25.8%.

Management estimated that the total value of sales lost because of the store closures were between $28 million to $32 million, which is net of the estimated sales benefit capture in the Adairs online channel.

The earnings before interest and tax (EBIT) impact of these lost sales is estimated to be between $12 million to $15 million.

Will things turn around?

The Adairs share price (and any share price) is unpredictable.

However, the company noted that the majority of NSW stores re-opened on 11 October 2021 and in their first week delivered “strong” strong like for like sales growth over the corresponding week in FY21.

Management said the NSW experience bodes well for the re-opening of its Victorian metro stores in early November which is an important trading period leading up to Christmas.

Adairs anticipates that pent-up demand, combined with the current online delivery delays, will encourage customers to shop in stores.

However, the gross profit margins have moderated from the record levels achieved in FY21, but are expected to remain above FY20. Global supply chain conditions have resulted in increases in fright and other sourcing costs that are placing extra pressure on the gross profit margin.

Adairs share price valuation

According to Commsec, the current Adairs share price is valued at 11x FY22’s estimated earnings.

The post The Adairs (ASX:ADH) share price has dropped 24% since June. What’s happening? appeared first on The Motley Fool Australia.

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• Adairs (ASX:ADH) share price pushes higher despite sales slump
• 2 excellent ASX dividend shares to buy now

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

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

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

What happened

Shares of Tesla (NASDAQ: TSLA) jumped on Thursday, rising more than 3% as of 11 a.m. EDT. The stock’s bump higher follows an analyst’s move this week to increase its 12-month price target for the electric-vehicle (EV) maker’s shares to $1,300. 

The growth stock‘s gain on Thursday builds on staggering momentum over the last month. Month to date, the stock is up a whopping 38% as investors digest the company’s strong third-quarter earnings report.

So what

Piper Sandler analyst Alexander Potter reiterated an overweight rating for Tesla stock and set a price target of $1,300 on Thursday, citing the fact that the competition’s attempts to gain momentum in the budding EV market are largely falling flat. In addition, he praised Tesla’s warranty performance, implying that the quality of the automaker’s vehicles is increasing.

An upbeat day for the overall market likely is also helping Tesla stock today. As of this writing, the S&P 500 was up 0.8%.

Now what

Tesla’s sky-high valuation, which gives the stock a price-to-earnings ratio of about 350, means the EV maker will have to follow through with strong performance in the final quarter of the year and going into 2022.

Management has guided for deliveries to rise more than 50% this year, but this view is likely considered conservative by many investors. Growth around 60% (or even higher) is more likely based on the company’s recent vehicle production rates and quarterly deliveries. 

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

The post Why Tesla stock jumped on Thursday appeared first on The Motley Fool Australia.

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• Why Tesla stock revved even higher on Tuesday
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• Why ASX lithium shares are surging higher on Tuesday
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Daniel Sparks 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 Tesla. 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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The Splitit Ltd (ASX: SPT) share price is edging higher on Friday morning. This comes after the company released its third-quarter results for FY21.

At the time of writing, the buy now, pay later (BNPL) company’s shares are up 2.5% to 41 cents apiece.

Third-quarter highlights

In an update that could be pushing the Splitit share price higher, the company recapped a quarter of moderate growth against a backdrop of COVID and “choppy macro conditions”.

Splitit achieved a record quarter in terms of merchant sales volume (MSV). This was up 31% year-on-year to US$93 million.

Gross revenue increased 20% year-on-year to US$2.6 million. The company said MSV growth was higher than revenue growth due to a more diversified merchant base and a higher proportion of MSV through its basic model.

Total merchants increased by 144% to approximately 3,300. This was driven by the company’s new merchant expansion, the appointment of executive advisors, and the launch of Splitit Plus.

Total shoppers increased by 78% to around 644,000 supported by a growing acceptance of Splitit and ongoing consumer engagement activities. Splitit pointed out its average order value (AOV) of more than US$1,000 remains a “critical differentiator” for the business.

Product innovations

In a further positive for the Splitit share price, the company went live with a number of product innovations. These helped to drive its total addressable market, acquire merchants, and streamline the onboarding process.

Splitit extended its reach by white-labeling its platform, turning it into a Platform as a Service offering. The new offering drove new partnerships with BNPL providers, tabby and QisstPay.

During the quarter, Splitit began offering its installment services to Discover Global Network cardholders worldwide. This partnership agreement will help Splitit tap into more than 50 million merchant acceptance locations and more than 20 alliance partner networks across the world.

More recently, Splitit completed integration with Salesforce Commerce Cloud, making it easier for e-commerce and retailers to offer Splitit services at the checkout.

Splitit share price in the deep red

The Splitit share price is down around 68% year-to-date as the rout continues to deepen between established and emerging ASX-listed BNPL players.

While the likes of Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) have managed to stay in positive year-to-date territory, smaller players including Splitit have seen valuations more than halve.

The post Splitit (ASX:SPT) share price climbing after third-quarter update appeared first on The Motley Fool Australia.

More reading

• Why is the Splitit (ASX:SPT) share price wobbling on Wednesday?
• The Splitit (ASX: SPT) share price slumped 8% today. Here’s why
• These were the best performing ASX BNPL shares in September

Motley Fool contributor Kerry Sun 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 AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. 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 Carsales.Com Ltd (ASX: CAR) share price has hit a bump on the road. It comes after the company held its 2021 annual general meeting (AGM).

At the time of writing, shares in the online vehicle retailer are trading for $25.04 – down 1.49%. For context, the S&P/ASX 200 Index (ASX: XJO) is 0.1% higher.

Let’s take a closer look.

What happened at the Carsales AGM?

Carsales revealed its outlook for FY22 in its presentation to shareholders. While the outlook was largely positive, investors don’t seem too revved up by it, judging by the falling Carsales share price.

The company said the following:

• Q1 of FY22 was tough for the company. Lockdowns in Australia’s two largest states had a material impact on car sales and listings. Since New South Wales and Victoria have opened up, however, sales are up.
• Carsales expects to deliver “strong” growth in Group Adjusted revenue, “solid” growth in Group Adjusted EBITDA and strong growth in Group Adjusted NPAT. The company said its financial performance will be more overly weighted to the second half of the financial year, due to the negative impacts of lockdowns.
• Outside of NSW and Victoria, car sales growth remained “solid” among established dealers and private listings.
• Core expenses are expected to increase with the end of JobKeeper.
• Finally, looking at its overseas businesses, Carsales expects strong growth in revenue and EBITDA across Brazil, the United States, and Korea.

Carsales FY21 results

When Carsales released its FY21 results, the Carsales share price increased.

At the time, and as it restated today, Carsales reported revenue up 4%, EBITDA up 10%, and adjusted NPAT up 11%. The company did declare a 10% lower dividend of 22.5 cents per share.

For the 12 months ended 30 June, Carsales delivered double-digit growth across its adjusted EBITDA and net profit metrics. This was broadly in line with the market’s expectations.

When the results were released, management said this reflected a resilient revenue performance driven by a strong performance from its international businesses, modest growth in the Australian business, and strong margin performance. The latter was apparently driven by cost management initiatives.

Carsales share price snapshot

Over the past 12 months, the Carsales share price has increased 17.4%. Year-to-date, shares in the company have increased 25.7%. Its 52-week high is $26.67 and its 52-week low is $16.72.

Carsales.com has an approximate market capitalisation of $7.1 billion.

The post Carsales (ASX:CAR) share price falls despite optimistic outlook appeared first on The Motley Fool Australia.

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• AFIC (ASX:AFI) share price struggles amid inflation concerns

Motley Fool contributor Marc Sidarous 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 carsales.com 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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A hot topic right now in the US and Australian markets is the emergence of exchange-traded funds (ETFs) that are investing in cryptocurrencies and blockchain technologies.

That’s why there is considerable interest in ETF Securities‘ new product launched this month, named ETFS Fintech & Blockchain ETF (Chi-X: FTEC).

The ETF aims to track the performance of the Indxx Developed Markets Fintech & DeFi Index.

That index contains 75 fintechs from developed nations, with a subset involved in blockchain and decentralised finance (DeFi) concepts.

“FTEC uses a full-replication strategy to track the index, meaning that it holds all the shares that make up the index,” states the ETF Securities’ website.

“Companies are equally weighted, meaning at each rebalance the companies are bought in an equal proportion.”

Where do I buy shares in FTEC?

Unfortunately, FTEC shares are not traded on the ASX. They were floated on the rival exchange Chi-X, which some broking platforms have access to.

ETF Securities has not answered The Motley Fool‘s enquiry about why the ETF is not listed on the ASX.

Historically, the ASX has been wary of shares involved in blockchain or cryptocurrencies, fearing that they expose retail investors to speculative risk.

A famous recent example is Animoca Brands, which deals with non-fungible tokens (NFTs) and develops video games.

The Hong Kong company was listed on the ASX but it was kicked out in March 2020 when it had a market capitalisation of $80 million.

By June this year, Animoca was valued at $1.29 billion as a private company after a $100 million capital raising round.

There is now much industry talk about ASX allowing its first blockchain-related ETF to float.

The BetaShares Crypto Innovators ETF is “coming soon” to the ASX but the company has not yet indicated when.

What are the businesses FTEC invests in?

The majority of holdings for FTEC are overseas shares. In fact, just 1.3% of the fund is held in Australian companies.

American shares account for 62.3% of the ETF value, and they unsurprisingly monopolise the 5 biggest holdings:

• Upstart Holdings Inc (NASDAQ: UPST): 3.2%
• Affirm Holdings Inc (NASDAQ: AFRM): 2.8%
• LendingClub Corp (NYSE: LC): 2.2%
• Marathon Digital Holdings Inc (NASDAQ: MARA): 2.0%
• Bill.com Holdings Inc (NYSE: BILL): 2.0%

The post Is ETFS Fintech & Blockchain ETF (FTEC) listed on the ASX? appeared first on The Motley Fool Australia.

More reading

• Carsales (ASX:CAR) share price falls despite optimistic outlook
• Leading broker tips Fortescue (ASX:FMG) share price to sink to $11
• Bitcoin mania down under: Is the new crypto miners ETF (DIGA) listed on the ASX?
• Anteotech (ASX:ADO) share price slides as product platforms make waves
• Why Goldman says PointsBet (ASX:PBH) share price sell off is a buying opportunity

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

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The Fortescue Metals Group Limited (ASX: FMG) share price is edging lower on Friday.

In morning trade, the iron ore giant’s shares are down 0.25% to $13.98.

This means the Fortescue share price is now down over 43% in 2021 and has its 52-week low in sight.

Could the Fortescue share price keep falling?

Unfortunately for shareholders, one leading broker believes the Fortescue share price could still fall meaningfully from here.

According to a note out of Goldman Sachs, its analysts have retained their sell rating and cut their price target on the company’s shares to $11.00.

Based on the current Fortescue share price, this implies potential downside of 21% over the next 12 months.

What did the broker say?

Goldman Sachs was disappointed with the company’s performance during the first quarter. Not only did Fortescue fall short of the broker’s shipments estimates, its price realisation and product mix were well under its expectations.

The broker commented: “FMG shipped 45.6Mt of iron ore in the Sep Q (-2% vs GSe) at an average price realisation of 73% vs. the 62% Fe benchmark, below GSe/consensus (77%) on provisional pricing impacts. Production of the higher grade 60% Fe West Pilbara Fines (WPF) declined to 3.7Mt or 8% of the product mix, well short of the targeted 15-20%, despite the new Eliwana mine now fully ramped-up to 30Mtpa.”

Why is it so bearish?

Despite the Fortescue share price falling so heavily this year, Goldman believes it is overvalued. This is particularly the case compared to rival Rio Tinto Limited (ASX: RIO).

It explained: “The stock is trading at c. 1.5x NAV vs. RIO at c. 0.8x NAV. FMG is also pricing in c. US$77/t (real) long run iron ore vs. our US$67/t (real 2021 $) estimate.”

The broker also has concerns over the widening of low grade iron ore price realisations.

Its analysts said: “Widening of low grade 58% Fe product realisations due to high coking coal prices and high steel mill margins (similar to the steel/iron ore market dynamics at the end of 2017). Based on the 58% Fe price, we see FMG’s price realisations dropping to 70% in Dec Q.”

In addition, Goldman has concerns over uncertainties around Fortescue Future Industries (FFI) diversification and Pilbara decarbonisation. It thinks “decarbonising the Pilbara could cost FMG over US$7bn and requires +US$50/t carbon or a green premia to be NPV positive.”

The post Leading broker tips Fortescue (ASX:FMG) share price to sink to $11 appeared first on The Motley Fool Australia.

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• ASX 200 (ASX:XJO) midday update: ANZ result impresses, Fortescue higher
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• Is green hydrogen the future for Fortescue (ASX:FMG) shareholders?
• 5 things to watch on the ASX 200 on Thursday
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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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