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The S&P/ASX 300 Index (ASX: XKO) is trading lower today, down 0.55% or almost 40 points at the time of writing.

Meantime, three ASX 300 shares have been upgraded by top brokers, as reported in The Australian today.

Let’s see why these ASX shares are attracting positive attention.

14% upside on James Hardie share price: Citi

The first ASX 300 share we’ll look at is building materials supplier James Hardie Industries plc (ASX: JHX).

Citi has raised its 12-month price target on James Hardie shares by 23% to $42.50.

The re-rating comes after the company released its fourth quarter and full-year FY23 results yesterday.

In early trading today, the James Hardie share price is $36.88, up 0.22% on yesterday’s close.

The stock rose by 8.3% yesterday, with ASX investors appearing to be very pleased with the numbers.

The company announced a record US$3,777.1 million in global net sales over the 12 months ending 31 March 2023, up 4% on the prior corresponding period (pcp).

Citi analyst Sam Seouw said James Hardie shares are a buy. He reckons the results show the company’s last profit downgrade, announced in November 2022, was likely its last.

Jarden Securities has also raised its rating on these ASX 300 shares to overweight.

James Hardie released its 2023 annual report on form 20-F this morning.

UBS raises AGL share price target by 19%

Among the ASX 300 shares dominating headlines in recent years is utilities provider AGL Energy Limited (ASX: AGL).

As my Fool colleague Tristan points out, there has been much kerfuffle over its plan to close coal power plants and transition to renewable energy and batteries, which is a capital-intensive exercise.

But UBS sees light at the end of the tunnel and has raised its share price target on AGL by 19% to $9.60.

In early trading on Wednesday, the AGL share price is $8.90, up 0.68%. The new price target implies a potential upside of 7.9% over the next 12 months.

AGL insiders appear to share this confidence, with nine directors investing more of their own money in AGL shares in 2023.

PointsBet shares to outperform: Credit Suisse

Our next broker upgrade among ASX 300 shares is for online sports betting company Pointsbet Holdings Ltd (ASX: PBH).

This will come as welcome news to PointsBet investors, who have gritted their teeth through a 20% share price slide over Monday and Tuesday.

The stock was sold down after PointsBet announced the sale of its United States arm on Monday.

As my Fool colleague James covered, Pointsbet is selling its US operations for US$150 million ($222 million). Shareholders will receive the net proceeds as capital returns. The company estimates returns of between $1.07 and $1.10 per share.

Credit Suisse has raised its rating on PointsBet shares to outperform. The broker now expects the PointsBet share price to ascend to $1.60 over the next 12 months.

The PointsBet share price is recovering on Wednesday, up 5.9% at the time of writing to $1.44.

The post 3 ASX 300 shares just upgraded by top brokers appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Develop Global, James Hardie, Life360, and Ora Banda shares stormed higher
• Why Elders, Northern Star, Pointsbet, and Weebit Nano shares are sinking
• ASX 200 share James Hardie surges 9% on record full-year results
• Does the US business sale make Pointsbet shares dirt cheap?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in James Hardie Industries Plc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended PointsBet. The Motley Fool Australia has recommended PointsBet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) gold shares have broadly enjoyed a great run over the past year.

The S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller gold miners outside of the ASX 200 gold shares – is up 18% over the past 12 months. That compares to a gain of 1% for the ASX 200.

Although selling off today, gold producers have widely benefited from increased demand for the yellow metal. This has seen gold approach its all-time highs of US$2,075 per ounce. That record was reached in August 2020, amid global angst and central bank money printing as COVID-19 ran rampant.

What’s happening with the gold price?

Gold, a classic haven asset, hit US$2,050 per ounce on 4 May, a development certainly welcomed by investors in ASX 200 gold shares.

Bullion has been benefiting from ongoing angst over the banking crisis in the United States, a potential global recession, and geopolitical uncertainty amongst the world’s nuclear powers.

A potential end to the successive string of interest rate hikes from the US Fed is also helping the gold price, as gold itself pays no yield.

Over the past few days, the gold price has retraced, currently trading for US$1,993 per ounce.

Which ASX 200 gold share has a 39% upside?

Macquarie is bullish on the outlook for the gold price and believes one of the big miners is trading at a bargain price.

With the range of factors aligned to spur demand for gold, the leading broker said it’s a “near enough perfect backdrop” to see bullion hit or exceed its record highs (courtesy of The Australian Financial Review).

While that would offer a tailwind for all ASX 200 gold shares, one of Macquarie’s preferred picks is Regis Resources Ltd (ASX: RRL).

The Regis Resources share price has underperformed most of its peers over the past year, gaining ‘only’ 11%. Shares are currently trading for $2.08 apiece.

The ASX 200 gold share has likely lagged its competitors due to a period of major capital expenditure.

Regis Resources managing director Jim Beyer said $350 million has been invested into the existing operations in “the capital intensive investment phase of the last two years”.

Now, he added, Regis is entering “a cash building phase as commercial production is expected to be declared at both Garden Well South underground and Havana open pit”.

Macquarie’s analysts are positive on that organic growth outlook.

They also flagged the New South Wales government’s approval for Regis’ McPhillamys gold project. The broker said the expected definitive feasibility study (DFS) at McPhillamys would be “a key catalyst” for the Regis Resources share price.

Macquarie has an outperform rating on the ASX 200 gold share with a price target of $2.90.

That’s 39% above the current Regis share price.

The post Top broker forecasts 39% upside for this ASX 200 gold share appeared first on The Motley Fool Australia.

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More reading

• Buy this ASX 200 gold share instead of Newcrest: broker
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• What’s the gold price forecast for the remainder of 2023?
• 5 things to watch on the ASX 200 on Thursday

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

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It has been a sensational start to the day for the Serko Ltd (ASX: SKO) share price.

In morning trade, the ASX tech share is up a massive 28% to $2.72.

Why is this ASX tech share rocketing higher?

Investors have been scrambling to buy Serko’s shares after the company released its full-year results.

Here’s a quick summary of how the company performed for the 12 months ended 31 March:

• Total income up 154% year over year to NZ$48 million
• Average revenue per booking up 65% to NZ$9.56
• Online bookings up 93% to 4.1 million
• Completed room nights on Booking.com for Business up 381% to 1.5 million
• EBITDAF loss improved by 23% to NZ$21.8 million
• Net loss after tax improved by 15% to NZ$30.5 million
• Cash and short-term deposits of NZ$87.7 million
• Underlying average monthly cash burn NZ$2.7 million

What happened during FY 2023?

For the 12 months ended 31 March, Serko reported a 154% increase in total income to NZ$48 million. A key driver of this growth was the company’s deal with travel giant Booking.com, which saw 1.5 million room nights completed via Booking.com for Business.

And while Serko continues to operate at a loss, its metrics are all heading in the right direction and its balance sheet remains strong. The company’s loss after tax improved by 15% to NZ$30.5 million, leaving it with cash and short term deposits of NZ$87.7 million.

In addition, the company’s cash burn has been reducing, which bodes well for the future. Management advised that its underlying average monthly cash burn reduced from NZ$3.3 million to NZ$2.7 million in FY 2023. Things were even better in the second half, with its underlying average monthly cash burn averaging NZ$1.8 million.

Outlook

Also giving the ASX tech share a boost today has been its guidance for FY 2024.

Management advised that it expects total income to come in at NZ$63 million to NZ$70 million. This represents an increase of 31% to 46% year over year.

This is expected to be underpinned by the continued business travel recovery, growth in active customers in Booking.com for Business, foreign exchange tailwinds, and improving average revenue per completed room night.

In addition, management advised that there are a number of initiatives which have the potential to drive further revenue growth. However, the timing and therefore the impact on FY 2024 revenues is uncertain.

As for costs, Serko anticipates a total spend of between NZ$86 million and NZ$90 million. This reflects its current investment plans and anticipated efficiency gains, partially offset by higher volume related costs.

The post Guess which ASX tech share is rocketing 28% on huge full-year results appeared first on The Motley Fool Australia.

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More reading

• 2 ASX All Ordinaries shares making big moves on trading updates
• Deja vu! Why is the Appen share price crashing 17% today?
• How much should I invest in ASX shares to quit work and live only off dividend income
• I’d invest $3,000 each in these ASX dividend shares for almost $1,000 in annual income
• Could ASX shares turn a $10,000 investment into $2,000,000?

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

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There has been plenty of activity of the All Ordinaries (ASX:XAO) index on Wednesday.

For example, two All Ordinaries shares that are making big moves in opposite directions are listed below. Here’s what’s going on:

Temple & Webster Group Ltd (ASX: TPW)

This online furniture retailer’s shares are lighting up the All Ordinaries index on Wednesday following the release of a trading update. At the time of writing, the Temple & Webster share price is up 8.5% to $4.10.

The company’s update revealed an improvement in its sales performance, with trading in the last four weeks up 10% over the prior corresponding period.

This means that sales are now down 5% over the prior corresponding period for the period 1 Jan to 15 May, which is an improvement on its 7% decline for the first five weeks of the second half.

Another positive is that management has reiterated its full-year EBITDA margin guidance of 3% to 5%. It also continues to have an exceptionally strong balance sheet, with no debt and cash levels remaining at $100 million.

Best & Less Group Holdings Ltd (ASX: BST)

Wednesday hasn’t started as positively for this All Ordinaries share. The discount retailer’s shares are down 4% in early trade to $1.87.  Investors have been hitting the sell button after the retailer released a trading update which included a profit guidance downgrade.

According to the release, for the 19 weeks of trading to date in the second half, total sales were up 1.8% on the prior corresponding period to $221.9 million.

And while recent trading in May has been encouraging, based on results to date, the company now expects to deliver pro forma net profit after tax of between $10 million and $12 million for the second half. This is down from its previous guidance of between $18 million and $20 million.

The post 2 ASX All Ordinaries shares making big moves on trading updates appeared first on The Motley Fool Australia.

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More reading

• Could ASX shares turn a $10,000 investment into $2,000,000?
• Here are the 10 most shorted ASX shares
• Goldman Sachs names 2 ASX tech shares to buy with massive upside
• Which ASX retail shares could be ‘most impacted’ by Amazon’s rapid growth?
• Here are the 10 most shorted ASX shares

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

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The Appen Ltd (ASX: APX) share price has returned from its trading halt and is crashing deep into the red again.

At the time of writing, the struggling artificial intelligence (AI) data service provider’s shares are down 17% to $1.91.

This means the Appen share price is now down 71% since this time last year.

Why is the Appen share price crashing again?

Investors have been selling down the Appen share price today after the company announced the completion of the institutional component of its fully underwritten ~$60 million equity raising. This comprises a $38 million 1 for 6 pro rata accelerated non-renounceable entitlement offer and a ~$21 million institutional placement.

According to the release, the company raised $21.2 million through the institutional placement and $8.8 million via the institutional entitlement offer. These funds were raised at $1.85 per new share, which represents a sizeable 19.6% discount to its last close price. It is also a 42% discount to where the Appen share price was trading just a little over a week ago, prior to the release of its disastrous trading update.

Appen’s CEO, Armughan Ahmad, was pleased with the news. He said:

Appen is delighted with the successful outcome of the Institutional Component of the Equity Raising and the support received from both existing and new institutional shareholders. We look forward to executing on the vision we have communicated to the market and delivering results for our shareholders.

The company will now seek to raise the balance via a retail entitlement offer at the same price.

Why is Appen raising funds?

The release explains that the proceeds of the equity raising will be used to fund one-off costs associated with its previously announced cost reduction program, provide balance sheet flexibility, and general working capital to support Appen’s return to profitability.

Management appears to believe the latter will be supported by the emergence of generative AI, which is the type of AI used by ChatGPT.

It notes that the generative AI market is estimated to grow from $8 billion in 2021 to more than $110 billion by 2030. And as high performing generative AI models rely heavily on human feedback, Appen believes it is well positioned to participate and gain share in the generative AI services market thanks to the launch of a new set of Large Language Model (LLM) fine tuning and assurance products.

Though, it is worth remembering that Appen is not alone in this market and there’s no guarantee that its products will be in demand by end users. And judging by the recent performance of the Appen share price, the market has yet to be convinced.

The post Deja vu! Why is the Appen share price crashing 17% today? appeared first on The Motley Fool Australia.

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More reading

• Why is the Appen share price in a trading halt?
• Macquarie forecasts Appen shares to crash a further 47%
• Broker gives its verdict on the Appen share price crash
• Better ASX tech share to buy now that the Nasdaq bear market is over: Altium or Appen?
• Why Appen, Bank of Queensland, Kogan, and Mayne Pharma 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. has positions in and has recommended Appen. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Building a portfolio of ASX shares capable of providing enough dividend income to allow an investor to quit their job might sound like a hard ask. But by investing strategically and consistently, I think I could end up raking in passive income.

Here’s how I’d aim to build a passive income stream large enough to replace my salary by buying ASX dividend shares.

Breaking it down

Stripping it back to bare basics, investing in ASX shares is as simple as buying a slither of a business. If that business has more cash than it needs to grow, it hands the unused portion back to its owners – or investors, in this case – in the form of dividends.

Thus, it’s possible to create a reliable income from dividends on the ASX. Though, I doubt building a portfolio large enough to provide me with a salary-sized revenue will be an overnight endeavour.

How much dividend income do I need to live?

Now, we get to the key question. How much a person needs to live will vary.

For instance, one wishing for a quiet countryside lifestyle will likely require less cash than another who hopes to boast an inner-city penthouse and regular international holidays.

Let’s say $70,000 a year would be enough to get me by. If I were able to realise a relatively average 5% dividend yield, I would need a portfolio worth $1.4 million.

On the other hand, if I were able to sustain an above average, but not unheard of, 7% dividend yield, my ASX portfolio would need to be worth just $1 million to bring in $70,000 of dividend income annually.

So, without a million dollars or more in my piggy bank, how will I build such a portfolio? Well, it might not be the feat it appears.

Building my ASX dividend income portfolio

If a $1 million passive income portfolio was my goal, I would start by assessing how much I could afford to invest each month.

Let’s say I were to set aside $700 a month. I might invest that in ASX shares capable of paying a 7% dividend yield on average, and reinvest all the payments I receive, thereby compounding my returns.

At that rate, it would take me around 33 years to build my targeted portfolio, assuming my shares don’t realise any capital gains. Though, historically, the bourse has always moved higher.

Of course, no investment is guaranteed to provide returns, and past performance isn’t an indicator of future performance.

But what if 33 years’ time was a little too far away for my liking?

Well, if I had a chunk of cash to begin with, or could fork out more than $700 a month, I could grow my ASX dividend income portfolio faster.

For instance, if followed my initial plan, but began by investing a $100,000 lump sum, I could boast a million-dollar portfolio in just 25 years.

The post How much should I invest in ASX shares to quit work and live only off dividend income appeared first on The Motley Fool Australia.

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More reading

• Deja vu! Why is the Appen share price crashing 17% today?
• I’d invest $3,000 each in these ASX dividend shares for almost $1,000 in annual income
• Could ASX shares turn a $10,000 investment into $2,000,000?
• Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues?
• Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger?

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ASX dividend shares with fairly high dividend yields can unlock a lot of passive income for investors.

By mixing a group of different businesses, we can achieve diversification and an excellent stream of cash flow.

But I wouldn’t just go for any business, I’d aim for companies with an improving dividend record and plans for future operational growth.

With that in mind, these are some of the ASX dividend shares I’d call on to build good dividend annual income by investing $3,000 into each of them to make around $1,000 of dividends by FY25.

Universal Store Holdings Ltd (ASX: UNI)

The business says that it owns a portfolio of “premium youth fashion brands and omni-channel retail and wholesale businesses”. The main brands are Universal Store and THRILLS, and it’s currently trialling a Perfect Stranger brand as a standalone retail concept. It has over 90 stores.

It’s benefiting from growing sales as well as improving underlying profit margins. Improving scale can help this business deliver much more earnings for investors. The company is hoping to have between 101 stores to 103 stores by 30 June 2023.

In FY25, the ASX dividend share is projected to pay an annual dividend per share of 35 cents, which would be a grossed-up dividend yield of 10.5%, according to the estimates on Commsec.

The business could be trading very cheaply based on the profit projection for FY25, with it valued at just 8 times FY25’s estimated earnings.

A $3,000 investment would pay a total of $315 of annual dividend income in FY25.

Metcash Ltd (ASX: MTS)

Metcash is a diversified retailer and wholesaler. It supplies IGA supermarkets around Australia. The business also supplies liquor brands including IGA Liquor, Bottle-O, Cellarbrations, Thirsty Camel and Porters Liquor. It also owns a number of hardware brands including Mitre 10, Total Tools and Home Timber & Hardware.

The ASX dividend share has benefited from increased demand for local neighbourhood shopping. It has also seen strong earnings growth from its hardware division, which has benefited from the acquisition of Total Tools.

Australia’s rising population and the company’s growing benefits of scale can help maintain and grow the earnings and dividend.

In FY25, the ASX dividend share is projected to pay an annual dividend per share of 22.2 cents according to Commsec. This would be a grossed-up dividend yield of 8.2%.

Commsec estimates put the Metcash share price at 11 times FY25’s estimated earnings.

A $3,000 investment would pay $246 of annual dividend income in FY25.

Adairs Ltd (ASX: ADH)

This ASX retail share sells homewares through Adairs, while its other businesses of Mocka and Focus on Furniture are best known as furniture retailers.

Its earnings can be cyclical as household demand for homewares and furniture isn’t typically at a constant rate through the economic cycle. However, times of weakness can be an opportunistic time to invest.

Adairs is looking to grow its profit through store network expansion, upsizing some locations to larger stores (which are more profitable), range expansion and growing its loyalty member numbers.

In FY25, the ASX dividend share is projected to pay an annual dividend per share of 22 cents according to Commsec, which equates to a grossed-up dividend yield of 14.3%.

The Adairs share price is priced at just 6 times FY25’s estimated earnings, which seems very cheap.

A $3,000 investment would pay $429 of annual dividend income in FY25.

Foolish takeaway

The three of these investments, totalling $9,000, could unlock $990 of annual dividend income. I think all of them have very promising futures, combined with strong projected dividends in the coming years.

The post I’d invest $3,000 each in these ASX dividend shares for almost $1,000 in annual income appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs says these ASX dividend stocks with big yields are buys
• How I’d try to turn a $20k ASX share portfolio into a second income of $6,000 a year
• I think these 2 ASX small cap shares could make big returns
• Morgans names 2 of the best small cap ASX shares to buy
• Why these ASX 300 retail shares could be immune to rising interest rates

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 positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool Australia has recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The ASX share market has done incredibly well at growing household wealth over the long term. In this article, I’m going to outline some of the factors that could create excellent wealth.

Is $2 million achievable with $10,000?

There have been some very successful investors in the past who have generated astonishing returns. For example, iconic investor Peter Lynch achieved an average return per annum of 29.2% between 1977 to 1990 with the Fidelity Magellan Fund.

I’m not sure if anyone would be able to replicate Lynch’s investment track record these days of almost 30% per annum for over a decade. Certainly, there are lots of well-equipped (financially and technologically) investors looking for opportunities.

And the good news is most people have more than 13 years to grow their wealth.

Indeed, compounding can grow our finances very quickly. It’s a combination of the (average) return per year and how many years it is left to grow.

The ASX share market has returned an average of around 10% per annum over the long term though, of course, past performance is not a reliable indicator of future returns.

But at that rate, if I invested $10,000 into the ASX share market and it returned 10% per annum, I’d get to $2 million in under 54 years.

How I’d try to grow my wealth quicker

There are a small group of ASX shares that have delivered huge returns over the long term.

If we’d invested in the 2010s in businesses like Altium Limited (ASX: ALU), Pro Medicus Ltd (ASX: PME), WiseTech Global Ltd (ASX: WTC), Aristocrat Leisure Limited (ASX: ALL), Xero Limited (ASX: XRO), REA Group Ltd (ASX: REA), ResMed (ASX: RMD), and TechnologyOne Ltd (ASX: TNE) then we’d be sitting on gains of at least 1,000%.

Certainly, I think there are a lot of factors these businesses have in common.

Firstly, they were a lot smaller than they are today. It’s typically much easier for a business to double in size from $100 million to $200 million than to go from $1 billion to $2 billion.

Another factor is that most of them have large total addressable markets. When a company expands beyond Australia’s shores, it gives them a much larger potential customer base. That longer growth runway with clients means companies can potentially see more profit growth, enabling (hopefully) strong returns for a long time.

Next, I’d want to find businesses that are involved in technology in some way. Technology is very cheap to reproduce for new customers (meaning high gross profit margins) and those businesses can expand very quickly. I think that’s why many of the best-performing businesses over the last 15 years revolve around technology, even if they’re not specifically from the IT sector.

Finally, I’d suggest that businesses involved in digitising the world have a strong tailwind. The world is increasingly going digital and moving online.

No one can know what ASX shares are next going to deliver returns of 1,000%. But I think some of the smaller businesses that have some of the elements I’ve just outlined are: cancer screening and risk assessment business Volpara Health Technologies Ltd (ASX: VHT), online marketplace for local services business Airtasker Ltd (ASX: ART), emerging market classifieds investor Frontier Digital Ventures Ltd (ASX: FDV), and online furniture and homewares retailer Temple & Webster Group Ltd (ASX: TPW).

And I’m also backing affordable jewellery retailer Lovisa Holdings Ltd (ASX: LOV) to do well with its global store expansion plan, even though it’s not involved in technology.

The post Could ASX shares turn a $10,000 investment into $2,000,000? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Frontier Digital Ventures, Lovisa, Pro Medicus, ResMed, Technology One, Temple & Webster Group, Volpara Health Technologies, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has positions in and has recommended ResMed, Volpara Health Technologies, WiseTech Global, and Xero. The Motley Fool Australia has recommended Frontier Digital Ventures, Lovisa, Pro Medicus, REA Group, Technology One, and Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Many S&P/ASX 200 Index (ASX: XJO) investors are crazy for lithium shares. And for good reason. As Global X ETFs head of investment strategy, Blair Hannon notes: “they’ve made a buttload of cash out of lithium”.

The asset management company is behind the Global X Battery Tech & Lithium ETF (ASX: ACDC), as well as other thematic exchange-traded funds (ETFs). Units in the ACDC ETF have nearly doubled in value since floating in 2018.

Among its holdings are shares in ASX 200 lithium producers Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE), and Mineral Resources Ltd (ASX: MIN). It also holds stakes in companies involved in the entire lifecycle of lithium, including lithium refiners and battery makers.

It’s perhaps unsurprising then, that Hannon is bullish on the future of lithium. Indeed, he told a recent media event that it’s still “very much early days” for the white metal, continuing:

We haven’t hit the tipping point globally. We’re not even close to it.

So, what might drive revenues of companies involved in the battery-making metal, perhaps including those of the ASX 200 companies producing it? Electric vehicle (EV) adoption is likely to be a major factor.

Are ASX 200 lithium shares at a ‘tipping point’ for revenue growth?

As Hannon points out, Australia has a “box seat” position for lithium supply, thanks to a swath of resources in Western Australia.

That’s reflected on the ASX 200, with many lithium shares calling the index home.

In addition to the three major ASX 200 stocks included in the Global X Battery Tech & Lithium ETF, there are newly-crowned producers Lake Resources N.L. (ASX: LKE), Sayona Mining Ltd (ASX: SYA), and Core Lithium Ltd (ASX: CXO), as well as up-and-coming takeover target Liontown Resources Ltd (ASX: LTR), to name a few.

But Hannon argues that lithium is just part of the solution to the problem. The problem being decarbonisation – a key emerging investing thematic.  

Fortunately for those mining lithium, the metal is an irreplaceable ingredient in battery-powered vehicles. And the globe is moving further and further towards a tipping point in electric vehicle (EV) adoption, according to Hannon.

Global EV sales are forecasted to grow at a compound annual growth rate (CAGR) of 14% between 2022 and 2035 as consumer demand takes off.

As per the rule of supply and demand, ASX 200 lithium shares, as well as stocks involved with other critical materials, could be on track to see their revenue soar in the coming years.

But when might we see it? Well, Hannon reckons a ‘tipping point’ for EV adoption could be when battery-powered vehicles represent 5% of all new car sales.

He points out that EVs reached 5% of car sales in China in 2020. The following year, they surged to represent 16% of sales. A similar pattern was said to have played out in Norway – now the leading nation in EV adoption.

Interestingly, 3.2% of new cars sold in Australia in 2022 were battery-powered. That’s according to data from the Federal Chamber of Automotive Industries.

The post Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues? appeared first on The Motley Fool Australia.

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More reading

• Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger?
• Brokers expect big gains and huge dividends from these ASX 200 mining shares
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• ASX 200 lithium shares: ‘A great opportunity to buy into weakness’?
• Could Core Lithium shares make the merger menu next?

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

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It certainly has been a great month for Allkem Ltd (ASX: AKE) shares.

Since this time in April, the lithium miner’s shares have hurtled 28% higher to close yesterday’s session at $14.79.

This has been driven largely by news that the company plans to merge with fellow lithium giant Livent Corp (NYSE: LTHM).

Where next for Allkem shares?

The good news is that one leading broker believes there are more gains to come for investors. That’s despite its analysts suggesting that Allkem shareholders might not be getting the better end of the deal.

According to a note out of Bell Potter, its analysts have retained their buy rating with a $19.20 price target. This implies potential upside of 30% for Allkem shares over the next 12 months from current levels.

What did the broker say?

As I mentioned above, the broker feels that Livent shareholders are the big winners from the merger agreement. It said:

Longer term, we don’t believe AKE shareholder’s ownership of NewCo (56%) reflects the company’s stronger earnings profile and dominant upstream position. While we don’t see it as a bad deal for AKE, it looks like a great deal for LTHM through strengthening its upstream capabilities, retaining key executive positions and receiving what we view as a disproportionately large share of NewCo.

Nevertheless, Bell Potter remains positive enough to maintain its buy rating. Particularly given how the US listing is likely to result in a valuation re-rating. It concludes:

AKE is now in-play; we think it is likely the LTHM merger will proceed and are not confident that an interloper will emerge. On a stand-alone basis the company has a strong production and earnings growth profile into what we expect to be an exceptionally strong market for lithium. Combining with LTHM and the NYSE listing could see an earnings multiple uplift. AKE is trading at a slight discount to the implied deal value, which we expect will close if deal certainty improves.

The post Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger? appeared first on The Motley Fool Australia.

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More reading

• Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues?
• ASX 200 lithium shares: ‘A great opportunity to buy into weakness’?
• Is a slice of Livent worth holding onto Allkem shares?
• 5 things to watch on the ASX 200 on Tuesday
• Brokers name 3 ASX shares to buy now

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

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