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The Betashares Asia Technology Tigers ETF (ASX: ASIA) might be one of the more interesting exchange-traded funds (ETF) to think about.

The purpose of this ETF is to give investors access to technology companies that are listed in Asia, outside of Japan.

There are a few different things to think about this potential investment:

Diversification

The ASX doesn’t have a lot of large technology businesses in its ranks. A lot of the ASX are also focused on certain industries like commodities and banking.

Betashares Asia Technology Tigers ETF gives diversification in multiple ways for potential investors.

There are a few different countries that are represented within the portfolio: China (making up 44.9% of the allocation), Taiwan (26.2%), South Korea (18.2%) and India (7.5%).

There are numerous technology sectors that investors can get exposure to through this ETF.

The ones that have sizeable positions include: internet and direct marketing retail (25.2%), semiconductors (20.9%), interactive media and services (17.4%), tech hardware, storage and peripherals (11.2%), interactive home entertainment (10%) and IT consulting and other services.

Growth-focused businesses

BetaShares says that due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector.

Looking at the 50 businesses in this tech portfolio, there are some large and growing ones like: Taiwan Semiconductor Manufacturing, Tencent, Samsung Electronics, Alibaba, Meituan, Sea, JD.com, Infosys, Pinduoduo and Netease.

Past performance is no guarantee of future performance. However, the returns of Betashares Asia Technology Tigers ETF has shown how quickly the group of businesses have been growing. Over the last three years, the ETF has achieved an average return per annum 19.4%.

Potentially cheaper than western counterparts

Asian businesses typically have lower valuations than some of the biggest US tech companies.

BetaShares says that Betashares Asia Technology Tigers ETF has a forward price / earnings ratio (p/e ratio) of around 20.

Looking at one of the other ETFs that BetaShares offers is Betashares Nasdaq 100 ETF (ASX: NDQ), which is a tech-heavy portfolio of US shares with names like Apple, Microsoft, Amazon, Tesla, Alphabet, Facebook, Nvidia, PayPal and Adobe.

The Betashares Nasdaq 100 ETF has a forward price/earnings ratio of almost 27.

Concerns about China’s economy

However, whilst there are compelling reasons to consider this ETF. It may also be worth noting that the Chinese economy is coming under focus with concerns about Chinese real estate developers – particularly Evergrande – and factoring in what that would mean if there was a flow-on effect to other businesses and other parts of the economy.

The post Why Betashares Asia Technology Tigers ETF (ASX:ASIA) could be a good investment appeared first on The Motley Fool Australia.

More reading

• 2 high quality ETFs for investors in October
• Why did the Betashares Asia Technology Tigers ETF (ASX:ASIA) struggle in September?
• Top ASX shares to buy in October 2021
• 2 top tech ETFs for ASX investors in October

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 BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and BetaShares Asia Technology Tigers ETF. 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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Owners of Flight Centre Travel Group Ltd (ASX: FLT) shares will likely be glad to learn Australians are booking more international holidays than domestic trips for the first time since the pandemic began.

The company is still haemorrhaging around $40 million each month. However, the company’s CEO Graham Turner flagged an uptick of interest in overseas travel.

At the company’s annual general meeting (AGM) on Wednesday, he commented: “The Australian reopening plan has sparked a flurry of activity and created a genuine buzz, leading to a significant uplift in leisure enquiry and quotes in recent weeks.”

Over the past week, the Flight Centre share price plummeted 10%. It finished Friday’s session trading at $20.29.

Let’s take a closer look at the boss of Flight Centre’s optimism.

Buckle up for a return to travel

Flight Centre shares might be in for a rebound soon, as international travel looks to be gearing up to do the same.

Turner told the company’s AGM the number of bookings to Fiji placed through Flight Centre’s Ignite business this month is in line with the amount made in October 2019.

Additionally, Australian interest in travelling to the United Kingdom, United States, and Fiji has increased by multiples of 6, 11, and 20 respectively over the last month.

As The Motley Fool Australia reported on Wednesday, sales through the company’s leisure and corporate travel arms are at 14% and 41% of pre-COVID levels respectively. Those figures need to reach 50% and 40% respectively before the company expects to break even.

Though, Turner believes that will be sooner rather than later. While he declined to give guidance, he commented that he expects the company will return to profitability this financial year.

He said in the post-COVID world, more people will likely seek out travel agents instead of going it alone.

Turner also said Flight Centre is a leaner, more efficient business than it was before the pandemic. That means it’s ready to respond to changes in the cycle quickly.

Finally, Flight Centre experienced a surge in demand when international borders reopened in the United States and South Africa. For that reason, it’s getting ready to see the same activity in Australia.

It’s now returning sales staff to full-time roles, creating ‘COVID support desks’, and enhancing its sales channels to reduce pressure on shop fronts.

Flight Centre share price snapshot

This week started off well for Flight Centre’s stock. Monday and Tuesday saw the Flight Centre share price gaining. Unfortunately, it took a turn for the worst and plummeted 4% on Wednesday and another 5% on Thursday.

It finished the week with a year-to-date gain of 26%.

The post Own Flight Centre (ASX:FLT) shares? The company is still bleeding cash, but it’s not all bad news appeared first on The Motley Fool Australia.

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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 recommended Flight Centre Travel 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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Owners of Afterpay Ltd (ASX: APT) shares might want to keep an eye on the big four banks as they edge closer into the buy now, pay later (BNPL) provider’s space.

This week, Westpac Banking Corp (ASX: WBC) brought out its own BNPL-esque offering.

Westpac’s new offering, named Flex, is aimed at a younger market wanting smaller bites of interest free debt. It adds to the list of emerging big-bank BNPL services.

As of Friday’s close, the Afterpay share price is $126. That’s 0.2% lower than it was at the end of Thursday’s session but 2.6% higher than it ended the week before.

Let’s take a closer look at Afterpay’s increasing competition from big banks.

Is this the next challenge facing Afterpay shares?

The Afterpay share price performed well last week despite the announcement of a new competitor.

Westpac’s Flex is a zero-interest credit card. It gives users access to $1,000 of credit at a flat monthly rate of $10. Notably, the $10 fee will only be charged to users who don’t pay off the previous month’s charges on time.

The application process for Flex will be entirely online. A digital card will be available minutes after a person’s application is approved.

Flex is expected to be launched by the end of the year. According to Westpac, it might come just in time.

The bank has found that 53% of gen Zs, 48% of millennials, 32% of Gen Xs, and 21% of Baby Boomers think traditional credit cards are losing their relevance.

Westpac’s Flex adds to the increasing list of big banks moving into the BNPL and interest fee credit spheres.

Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) both have similar offerings, respectively named Neo and StraightUp Card.

CBA also has a BNPL offering named StepPay and broke into Afterpay’s future purchaser, Square Inc‘s (NYSE: SQ) space this week with the launch of its Smart terminal.

Right now, Afterpay shares are trading for 5% more than they were at the start of 2021. They’ve also gained 23% since this time last year.

The post Own Afterpay (ASX:APT) shares? Here’s how the big banks are honing in on the BNPL sector appeared first on The Motley Fool Australia.

More reading

• Could the Afterpay (ASX:APT) share price hit $150 by the end of 2021?
• Afterpay (ASX:APT) and other BNPL shares in focus as RBA looks to rein in regulation
• What’s happening with the CBA (ASX:CBA) share price this week?
• Own Westpac (ASX:WBC) shares? Here’s how the bank plans to compete with Afterpay
• NAB (ASX:NAB) share price nudges 2-year, post-COVID high

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Square. 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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Are you looking for some dividend options for your portfolio in October? Then check out the two ASX shares listed below.

Here’s why these ASX dividend shares have been tipped to as buys this month:

Centuria Industrial Reit (ASX: CIP)

The first dividend share that income investors might want to take a look at is Centuria Industrial. This industrial focused property company has built a portfolio of quality assets aiming to deliver income and capital growth for investors.

It has also just added to this portfolio with the acquisition of eight freehold urban infill industrial assets for $351.3 million. This acquisition expands Centuria Industrial’s exposure across attractive industrial sub-sectors. These include distribution centres, cold storage, and transport logistics.

One broker that was pleased with the acquisition was Macquarie. In response to the deal, the broker retained its outperform rating and lifted its price target to $4.22.

As for dividends, Macquarie is forecasting a 17.3 cents per share distribution in FY 2022 and an 18.4 cents per share distribution in FY 2023.

Based on the current Centuria Industrial share price of $3.75, this will mean yields of 4.6% and 4.9%, respectively.

Suncorp Group Ltd (ASX: SUN)

Another dividend share to look at is Suncorp. It helps Australians build their futures and protect what matters by offering insurance, banking, and wealth products and services through some of Australia and New Zealand’s most recognised financial brands. These include AAMI, Apia, Bingle, GIO, Shannons, Vero, and the eponymous Suncorp brand.

One top broker that is very positive on the company is Goldman Sachs. It currently has a buy rating and $13.74 price target on its shares.

In addition, Goldman is forecasting attractive dividend payments in the coming years. It has pencilled in fully franked dividends per share of 61 cents in FY 2022 and 73 cents in FY 2023.

Based on the current Suncorp share price of $12.30, this will mean yields of 5% and 5.9%, respectively.

The post 2 buy-rated ASX dividend shares for next week appeared first on The Motley Fool Australia.

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• Analysts rate these 2 ASX dividend shares as buys
• Why this fund manager is bullish on the Suncorp (ASX:SUN) share price
• 2 quality ASX dividend shares with 4%+ yields
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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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Luckily for income investors, the Australian share market is home to a good number of quality dividend shares. One of those is Coles Group Ltd (ASX: COL).

Why buy Coles’ shares?

Since GJ Coles opened his first store in Collingwood, Victoria in 1914, Coles has gone on to become one of Australia’s most recognisable brands and one of the big two players in the supermarket industry with a network of over 800 locations across the country. In addition to this, Coles has an equally large liquor store and express store network.

This gives the company extraordinarily defensive qualities, which have been on display for all to see during the pandemic. For example, in FY 2021, Coles delivered a 3.1% increase in sales to $38,562 million and a 7.5% jump in net profit after tax to $1,005 million despite cycling panic buying in parts of FY 2020.

The good news is that the company still sees plenty of room to grow its footprint further and also its online business. Combined with its focus on automation, this is expected to underpin solid earnings and dividend growth over the 2020s.

In the meantime, the team at Morgans expect Coles to pay fully franked dividends of 61 cents per share in FY 2022 and then 62 cents per share in FY 2023. Based on the current Coles share price of $17.95, this represents yields of ~3.4% for both years.

Another positive is that the broker sees decent upside in the Coles share price at the current level.

Morgans currently has an add rating and price target of $19.80. This implies a potential return of 10.3% over the next 12 months, which stretches to almost 14% if you include dividends.

All in all, this could make the Coles share price a decent option for income investors next week.

The post Is Coles (ASX:COL) a must-buy dividend share for income investors? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. 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 Airtasker Ltd (ASX: ART) share price may be worth thinking about because the business could have a lot of growth potential.

What is Airtasker?

For readers that don’t know what Airtasker is, it’s a platform business that connects people who are ready to work with people who need work to get done.

It offers a wide range of tasks, such as home cleaning, handyman jobs, admin work, photography, graphic design or building a website.

With that in mind, here are some reasons why the Airtasker share price could be one to think about:

Rapid growth

A business that is growing revenue quickly over several years gives itself more chance to deliver good returns to shareholders.

In FY21 alone, it saw 38% revenue growth to $26.6 million. This beat the prospectus guidance of $24.5 million. Gross profit went up 39% to $24.8 million.

The last financial year also saw gross marketplace revenue (GMV) increase by 35% year on year to $153.1 million, beating the prospectus forecast of $143.7 million. Two years ago in FY19 its GMV was $93.2 million.

Underlying pro forma earnings before interest and tax (EBIT) grew by 57.2% to a loss of $2.2 million.

Very strong margins

The ASX share says that its user-aligned business model and light touch operations deliver strong gross profit margins.

In FY21 it saw a gross profit margin of 93%. Not many ASX shares have gross margins above 90%. Within that gross margin, 4.9% was for payment costs and 2.1% of insurance costs.

When a business has such a high gross profit margin, it means that a lot of the new revenue can fall straight to the next line of profit. This could be helpful for driving the Airtasker share price higher if underlying profit can grow.

Already cashflow positive

Lots of technology businesses list onto the ASX with outflows of operating cashflow as they spend for growth until scale allows them to reach breakeven.

However, Airtasker achieved positive operating cashflow of $5.5 million in FY21, beating its prospectus forecast of $0.1 million.

Management said that with positive operating cashflow and a strong cash balance, it is well positioned to invest in international expansion.

Global growth potential

International growth could help the Airtasker share price climb over time.

The business is already making progress overseas. In FY21, the UK marketplace saw GMW growth of 232% year on year and growth of 93% quarter on quarter.

In the US, it said that the Zaarly integration and US expansion planning was progressing well. It is aiming to start in the cities of Kansas City, Dallas and Miami.

It’s hoping to reach an international annualised run rate of GMV of between $8 million to $10 million by June 2022.

Airtasker thinks that its total addressable market is many billions of dollars across Australia, the US and UK for existing local service industries. It wants to grow new services like flatpack furniture assembly and date night planning to complement existing services like cleaning, photography and office administration.

In FY22, it’s targeting revenue of at least $35 million and GMV of at least $200 million.

The post Here’s why the Airtasker (ASX:ART) share price could be a buy appeared first on The Motley Fool Australia.

More reading

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• Top ASX shares to buy in October 2021
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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. has recommended Airtasker Limited. 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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One of the best large cap performers in the resources space this year has been the South32 Ltd (ASX: S32) share price.

Since the start of the year, the mining giant’s shares have risen a sizeable 52%.

This is almost five times greater than the return of the S&P/ASX 200 Index (ASX: XJO).

Could the South32 share price hit $4.50 by Christmas?

Given the impressive run that the South32 share price is on, investors may be wondering just how high it can climb.

Well, the good news is that one leading broker still sees plenty of upside ahead for the company’s shares.

According to a note out of Goldman Sachs this week, its analysts have retained their conviction buy rating and $4.40 price target on its shares.

Based on the current South32 share price of $3.80, this implies potential upside of approximately 16% for investors.

But it gets even better. Goldman believes that South32’s shares will provide investors with a fully franked 11% dividend yield in FY 2022. This brings the total potential return to 27%. Not bad considering its shares are already up 52% this year.

Based on the above, the team at Goldman Sachs appear to see scope for the South32 share price to be trading in or around the $4.50 mark by Christmas.

What did it say?

There are a few reasons why Goldman is bullish on the mining giant.

It explained: “1. Valuation: The stock is trading at c. 1x NAV (A$3.88/sh) excluding [the recently announced copper acquisition of] Sierra Gorda.

2. Strong FCF outlook: We forecast a FCF yield of c. 15% in FY22 & FY23 (over 20% at spot), driven mostly by exposure to base metals (aluminium & alumina c. 50% of FY22 EBITDA, zinc/nickel c. 20%).

“3. Increased capital returns: We assume the buyback continues to be extended (at US$250mn p.a) and S32 continues to pay out 70% of earnings (40% ordinary, 30% special dividend component). On our estimates, S32 is on a dividend yield of c. 11-12% in FY22 & FY23.”

In addition, the broker notes that there’s positive newsflow on the horizon that could be a catalyst to driving the South32 share price higher.

Goldman commented:: “We would see the commitment to the restart of the Alumar aluminium smelter as a positive (c. 6% upside to EBITDA), and highlight the potential for capex on the US$800mn Dendrobium next domain (DND) met coal project to be reduced (which we would view as a positive), S32 is currently selling a base metal royalty portfolio (no value in our model), and is due to release the PFS results from the Hermosa zinc/silver/lead project (GS NPV US$1.1bn) in Arizona in Nov/Dec.”

The post Could the South32 (ASX:S32) share price reach $4.50 by Christmas? appeared first on The Motley Fool Australia.

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• Which ASX 200 dividend shares have investors been heavily trading this week?
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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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In this era of very low interest rates, it’s no wonder that investments that have higher yields might be interesting to some investors. This article is about two ASX dividend shares.

There are some ASX dividend shares that have relatively high dividend yields.

Just because a company pays a dividend doesn’t automatically make it worth owning. However, these two may be particularly interesting over the coming years:

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the largest furniture retailers across Australia and New Zealand.

At the time of the FY21 result, it had 61 showrooms. The company continues to assess new opportunities in line with its long-term network target of 85 showrooms.

The business is also looking to grow with online sales. In FY21, its online written sales orders were $18.3 million, compared to $3 million in FY20. The earnings before interest and tax (EBIT) contribution from the online channel was $8.8 million compared to $0.6 million in FY20.

In FY21, its total sales grew 42.1% to $373 million, whilst underlying net profit after tax (NPAT) doubled to $84.2 million.

The ASX dividend share paid a full year dividend of $0.65 per share. That equates to a trailing grossed-up dividend yield of 6.4%.

Nick Scali is rated as a buy by Citi, with a price target of $16.80. One of the reasons for the broker’s positivity about the business is its recent announcement that it’s buying Plush. In FY21, Plush made $160 million of revenue with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $27 million.

Citi thinks the Nick Scali share price is valued at 16x FY23’s estimated earnings with a FY23 grossed-up dividend yield of 6.7%.

Centuria Industrial REIT (ASX: CIP)

This ASX dividend share is a real estate investment trust (REIT) that owns a portfolio of industrial properties. Indeed, it aims to be Australia’s leading domestic pure play industrial REIT.

Its goal is to deliver income and capital growth to investors.

The portfolio is diversified by geography, sub-sector, tenants and lease expiry. The sectors it’s invested in are: manufacturing, distribution centres, transport logistics, data centres and cold storage. Centuria Industrial REIT currently has around 75 properties, with a portfolio occupancy of 97.4% and a weighted average lease expiry (WALE) of nine years.

It’s regularly expanding the portfolio. For example, it recently settled on the $200 million acquisition of a distribution centre at 56-88 Lisbon Street, Fairfield, New South Wales.

In FY22, it is expected to generate funds from operations (FFO) per security of at least 18.1 cents. The ASX dividend share is expected to pay a distribution of 17.3 cents per unit in FY22 – that translates to a forward distribution yield of around 4.6%.

The manager of Centuria Industrial REIT, Jesse Curtis, said:

Centuria Industrial REIT continues to benefit from macro trends that increase demand for last mile industrial space within close proximity to large population catchments. Centuria Industrial REIT’s industrial portfolio is skewed towards these infill markets where increased tenant demand and limited supply opportunities is driving upward pressure on market rents.

It’s currently rated as a buy by the broker Macquarie Group Ltd (ASX: MQG), with a price target of $4.22. In FY23, Macquarie thinks the ASX dividend share will pay a distribution of 18.40 cents per unit. That would be a yield of 4.9%.

The post 2 high-yielding ASX dividend shares – Saturday appeared first on The Motley Fool Australia.

More reading

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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. 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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The two ASX shares in this article could be compelling opportunities to consider.

Some businesses are rated as buys by analysts at brokerage outfits. Those brokers are always on the lookout for opportunities.

There are some businesses that grew profit significantly over FY21 and have plans to grow further over the long-term.

Here are two ASX shares that could be ideas to think about:

City Chic Collective Ltd (ASX: CCX)

City Chic is a retailer that sells plus-size clothes, footwear and accessories for women.

It has a number of operating businesses for different segments and geographic regions of the market. Names include City Chic, CCX, Avenue, Evans, Fox & Royal, Hips & Curves and Navabi.

The idea of all these brands is to grow in the global plus-size market. Management believes there’s still plenty of growth potential in the USA, UK, EU and Canada with its current product stream.

The ASX share said that the average annual spend in plus-size is currently materially less than the rest of the women’s apparel market and there are increasing rates of plus-size women globally. Current online sales represent around 25% of total plus-size sales globally. The company said there is strong forecast growth in online channels in the global plus-size market.

City Chic is growing organically and through acquisitions, such as Evans in the UK.

In FY21, the business generated sales revenue growth of 32.9%, whilst underlying net profit grew 80.6%. Online sales grew 49.3% and represented 73% of total sales.

Morgan Stanley rates the ASX share as a buy, with a price target of $6.65. It thinks it can win market share from competitors.

Metcash Limited (ASX: MTS)

Metcash is a business that operates across three pillars – food, liquor and hardware.

It’s the largest supplier to independent supermarkets in Australia. Metcash supplies over 1,600 stores including IGA and Foodland. In liquor, it is the second largest player in the market, supplying around 90% of independent liquor stores in Australia such as IGA Liquor, Bottle-O and Cellarbrations. The ASX share is also the second largest player in the Australian hardware market, with the Mitre 10 and Home Timber & Hardware businesses.

Metcash also recently increased its ownership of Total Tools from 70% to 85% for an acquisition cost of $59.4 million. Total Tools is the largest professional tools network in Australian with 90 bannered stores.

The ASX share says that Total Tools has “significant growth opportunities”. Growth plans includes expansion of the store network and the acquisition of an ownership interest in some stores.

Metcash says that it has a strong focus on shareholder returns. It has recently increased its target dividend payout ratio from 60% to 70% of net underlying profit after tax, together with an announced off-market buy-back of $200 million.

In the first 16 weeks of FY22, food sales growth slightly reversed as it’s now cycling against strong sales in FY21.

However, liquor and hardware sales continue to rise in FY22, with growth of 9.5% and 16.3% respectively. Metcash said that trade sales continued to be strong, buoyed by a high level of residential construction and renovation activity.

The broker UBS currently rates Metcash as a buy, with a price target of $4.60. UBS believes that the Metcash share price is valued at 17x FY23’s estimated earnings.

The post Compelling opportunities: 2 quality ASX shares to consider appeared first on The Motley Fool Australia.

More reading

• Why this supermarket is outperforming the Woolworths (ASX:WOW) share price lately
• Metcash (ASX:MTS) share price struggles as CEO steps down
• 2 ASX shares that may be worth researching this weekend
• Up 116% in a year, is the City Chic (ASX:CCX) share price good value?
• 2 ASX 200 shares that could be buys for dividends

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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 last two and half months have been largely uneventful for the Afterpay Ltd (ASX: APT) share price.

Since the initial reaction to agreeing to be acquired by Square (NYSE: SQ) on 2 August, the buy now pay later (BNPL) provider’s shares have traded largely flat and ended last week at $126.00.

Could the Afterpay share price reach $150 by the end of 2021?

As I alluded to above, Afterpay is in the process of being acquired by US payments giant Square.

And unlike a takeover with a fixed dollar price, this takeover is an all-scrip deal. This will see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share they hold.

This means that the Afterpay share price is intrinsically linked to the Square share price between now and the transaction completion. If the latter rises, so too does the former. And vice versa if Square’s shares fall.

So if the Afterpay share price is going to climb to $150.00 by the end of the year, the Square share price is going to have to get moving.

Bullish broker

The good news for Afterpay shareholders is that one leading broker is bullish on Square. That broker is Jefferies.

According to a note from earlier this month, courtesy of CNBC, its analysts have commenced coverage on the company with a buy rating and US$300 price target.

Jefferies analyst Trevor Williams has called Square a “must-own” stock, noting that its increasingly popular Cash App is “the leader within the crowded neobank category” with “40 million monthly active users that are already highly engaged.”

In addition, the broker appears to be a fan of the proposed acquisition of Afterpay.

Williams commented: “So we just think the inherent advantage of a scaled user base and a track record of demonstrated innovation in the cash app really position it well over the longer term. And then when you plug in the benefits of Afterpay, we think the positive flywheel effect there is only going to accelerate over the coming years.”

What does this mean for Afterpay shares?

Based on current exchange rates and the fixed exchange ratio of 0.375 shares, if the Square share price were to reach Jefferies’ price target of US$300, it would imply a takeover price of $150 per Afterpay share.

All in all, this indicates that there is potential for the Afterpay share price to be trading at that level by the end of the year.

Though, it is worth noting that shares usually trade at a discount to the takeover price to account for uncertainty. As a result, Square’s shares may need to trade a little beyond Jefferies’ price target to make this a reality.

The post Could the Afterpay (ASX:APT) share price hit $150 by the end of 2021? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Square. 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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