Tag: Motley Fool

The AnteoTech Ltd (ASX: ADO) share price is breaking its negative streak this week to surge higher today.

This comes after the nanotechnology company announced that it has partnered with in-vitro diagnostic products supplier, UC Biosciences Inc. (Unison).

At the time of writing, AnteoTech shares are fetching 21 cents, up 13.89%.

AnteoTech expands market access

Investors appear pleased with the company’s latest developments, sending AnteoTech shares higher.

According to its release, AnteoTech advised it has signed a distribution agreement with Unison to dispense its EuGeni products in the Philippines. This includes a reader platform and SARS-CoV-2 (COVID-19) antigen Rapid Diagnostic Test (RDT).

Under the agreement, Unison will become the exclusive distributor for EuGeni sales into the Philippines.

The initial term will be 3 years, which is renewable year-on-year after the initial period has elapsed.

Should government or large enterprises present tender opportunities, both companies will work together on a case-by-case basis.

The distribution agreement came into effect on 5 August 2021.

AnteoTech CEO, Derek Thomson welcomed the new collaboration, saying:

I am very pleased to welcome Unison as a distribution partner. Unison has over 40 years’ experience as a distributor, with a strong sales network.

The Philippines has a population of over 100 million people and have used rapid antigen testing as a tool within their pandemic response.

With Unison coming on board, we have expanded our distribution network and coverage across South East Asia.

Over the coming weeks we will work with Unison to ensure we have the required regulatory approvals in place to commence selling into the Philippines market.

About the AnteoTech share price

Over the past 12 months, AnteoTech shares have roared beyond a 200% increase, with year-to-date gains sitting at 86%. The AnteoTech share price hit a 52-week high of 49.5 cents before coming back down.

AnteoTech has a market capitalisation of roughly $394 million with 1.97 billion shares on its books.

The post Why the AnteoTech (ASX:ADO) share price is racing 13% higher today appeared first on The Motley Fool Australia.

More reading

• Ellume is making news and these ASX shares are surging, again
• AnteoTech (ASX:ADO) share price lifts as Ellume US sales ramp-up
• The 5 best ASX shares of FY21 revealed
• The 5 best performing ASX healthcare shares of FY21, did yours make the cut?

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.

from The Motley Fool Australia https://ift.tt/2VAMR7b

The News Corporation (ASX: NWS) share price hit a new yearly benchmark on Friday morning after the international media company reported its FY21 earnings.

At the time of writing, News Corp shares are selling for $34.52 – up 5.79%. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is flat.

Let’s take a closer look at the results.

News Corp share price increases on first profit in a year

• Revenues increased 4% to $9.4 billion.
• Net profit of $389 million compared to $1.6 billion net loss in prior corresponding period (pcp).
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA) was $1.3 billion. In the pcp it was $1 billion.
• Earnings per share (EPS) of 56 cents as opposed to a $2.16 loss in the prior year.

What happened in FY21 for News Corp?

There have been several major stories that have impacted the News Corp share price in FY21.

One such story was when it reportedly rejected an approach from an unnamed corporation for its Australian subscription television business Foxtel. Foxtel had a 40% growth in paid subscribers in the financial year.

Another story was the deal News Corp, among other ASX media companies, made with tech giants Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG). The two Silicone Valley behemoths agreed to pay News Corp for stories shared on their platform. The deal came after intervention from the Australian government and its legislated Media Bargaining Code.

At first, Facebook and Google were so opposed to the code it initially blocked all Australian news from being shared on its platform for five days. The tech companies only dropped the news ban when the government agreed to make several amendments to the bill.

What did management say

News Corp CEO, Robert Thomson, said of today’s report

Fiscal Year 2021 was the most profitable year since we created the new News Corp in 2013, with revenues rising 4 percent in the full year and surging by 30 percent in the Fourth Quarter. Profitability improved by 26 percent for the year, when we had a record number of digital subscriptions, record revenue and profits at Move and record traffic at realtor.com, record profits at HarperCollins and the largest profit at Dow Jones since its acquisition in 2007.

What’s next for News Corp

In his statement, Robert Thomson said News Corp expects to make “nine figures” annually from its aforementioned deal with Facebook and Google, although the exact sum is confidential.

With COVID cases surging in both the US and Australia, news media still faces an uncertain future.

Over the past 12 months, the News Corp share price has increased an impressive 81.7%. It outperformed the ASX 200 by over 57 percentage points in that time.

News Corp has a market capitalisation of $19.3 billion.

The post The News Corp (ASX:NWS) share price hits 52-week high on FY21 earnings appeared first on The Motley Fool Australia.

More reading

• Why UBS just upgraded these 3 ASX shares to “buy”
• These ASX 200 CEOs have the most wealth tied up in their companies
• Better than Amazon: This ASX share has multiplied 910 times in 20 years

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3xybVJm

The Peak Resources Ltd (ASX: PEK) share price has returned from its trading halt and is sinking on Friday.

In morning trade, the rare earths producer’s shares have fallen 14.5% to 9.4 cents.

Why is the Peak Resources share price sinking?

The catalyst for the weakness in the Peak Resources share price on Friday has been the announcement of the completion of its placement to institutional, sophisticated and professional investors.

According to the release, the company has received commitments to raise approximately $30 million through a two-tranche placement.

Tranche one comprises the placement of 226.8 million shares at 9 cents per share to raise $20.4 million. This represents an 18.2% discount to the Peak Resources share price prior to its trading halt.

Tranche two comprises the placement of 106.4 million shares to raise a further $9.6 million at the same price. This remains subject to shareholder approval

In addition to this, the company will seek to raise a further $4 million via a share purchase plan. This will be undertaken at the placement price of 9 cents per new share.

Why is Peak Resources raising funds?

The proceeds will be used to progress the development of the Ngualla Project and the Teesside Refinery, including offtake and financing arrangements. It also intends to expand its technical and marketing team, and repay the ANRF Royalty Facility in full.

In respect to the latter, the repayment of the ANRF Royalty Facility and accrued interest will cost approximately US$10 million. It will result in the termination of a 2% life-of-mine gross revenue royalty and the release of related security arrangements.

Management notes that the termination of the royalty and related security arrangements enables Peak to fulfil its commitment to transfer the Ngualla Project Special Mining Licence into a newly registered Tanzanian company. That company will be jointly owned by Peak (84%) and the Tanzanian Government (16%).

It feels this enhances shareholders’ exposure to the Ngualla Rare Earth Project and better positions the project to secure attractive long term financing.

Peak Resources’ Managing Director, Bardin Davis, said: “We are delighted to be welcoming new Australian and international institutional investors on to our register. The placement will support Peak as it progresses offtake, funding and development milestones for the Ngualla Project and the Teesside Refinery.”

“The termination of the life-of-mine royalty further de-risks the financing of the Ngualla Project and provides shareholders with increased exposure to earnings from the project and the potential upside in rare earth prices. A combination of lower project outflows and the removal of security arrangements will also better position the project to secure attractive long-term project and export financing support,” he added.

The Peak Resources share price is still up over 30% since the start of the year despite today’s decline.

The post Why the Peak Resources (ASX:PEK) share price is sinking 14% on Friday appeared first on The Motley Fool Australia.

More reading

• Why the Peak Resources (ASX:PEK) share price is soaring 37% today
• Why is the Peak Resources (ASX:PEK) share price halted today?

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.

from The Motley Fool Australia https://ift.tt/37unDtz

The Argosy Minerals Limited (ASX: AGY) share price is jumping higher in early trade, up 3.57%.

Below we take a look at the ASX resource explorer’s latest lithium update.

What lithium update did Argosy announce?

Argosy’s shares are gaining today. It comes after the company reported it had completed the magnetotelluric (MT) resistivity field survey works at its Tonopah Lithium Project.

The survey at Tonopah, located in the US state of Nevada, covered roughly 20 linear kilometres.

Argosy will now analyse the data to identify potential lithium brine target areas and set down priority drill target sites.

Commenting on the progress, Argosy’s managing director Jerko Zuvela said:

With lithium market sentiment and lithium carbonate prices continuing their strong upward momentum, and the significant push for lithium supply in the USA fast becoming critical in their aim to promote the highly strategic battery minerals industries, our Tonopah Lithium Project is in prime position and enhances Argosy’s value to all strategic groups across the battery and EV (electric vehicle) industry supply chain.

Noting its location in a jurisdiction that supports the commercial development of lithium, the company sees Tonopah as a significant opportunity to leverage its lithium brine processing technology in the US.

Zuvela added: “We look forward to progressing and realising the potential from our Tonopah Lithium Project, in an established tier 1 mining region, as the new green economy initiatives in the USA will trigger aggressive plans for this industry.”

Additonally, Argosy also has a current 77.5% (and ultimate 90%) interest in the Rincon Lithium Project in Argentina.

Argosy Minerals share price snapshot

The Argosy Minerals share price has gained 189% over the past 12 months. By comparison the All Ordinaries Index (ASX: XAO) is up 26% in that same time.

Year-to-date Argosy Minerals shares have continued to march higher, up 21% in 2021.

The post Argosy Minerals (ASX:AGY) share price lifting off on lithium update appeared first on The Motley Fool Australia.

More reading

• Why Argosy Minerals, Genworth, Vulcan, & Zip shares are charging higher
• Here’s why the Argosy (ASX:AGY) share price is climbing today
• Why the Argosy Minerals (ASX:AGY) share price has surged 17% today
• Here’s why the Argosy Minerals (ASX:AGY) share price is soaring today
• Argosy Minerals (ASX:AGY) share price climbs following Rincon update

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.

from The Motley Fool Australia https://ift.tt/3rYK7N6

China shares have been a hot topic for investors over the past month. One of the most popular stocks is Tencent Holdings Ltd (SEHK: 0700), which is currently valued at about A$744 billion.

There are, however, some risks that come with investing in China shares like Tencent. One such risk is government intervention – something that Magellan Financial Group Ltd (ASX: MFG) chairman Hamish Douglass is well accustomed to.

The esteemed fund manager’s Global fund counted Chinese tech titans Alibaba Group Holdings (NYSE: BABA) and Tencent as its sixth and eighth-largest holdings. At the end of June, the two companies combined made up 9.3% of the fund’s allocation.  

Dark cloud of uncertainty

If there is one thing investors don’t like, it’s uncertainty. The more unknown and uncontrollable variables, typically the more risk. In the case of companies at the peril of China state intervention, this risk has been manifested into reality more recently.

Earlier in the week, shares in Tencent tumbled as a state-owned newspaper described video games as “spiritual opium”. The remarks prompted Tencent shareholder concern about tighter regulations on the industry. Indeed, investors shot first and asked questions later as shares in the China-based company swiftly fell more than 10% on the news.

However, Tencent is not alone in its receipt of capitalistic criticisms recently. July bared witness to the demolition of the newly listed ride-sharing company, DiDi. The part celebratory listing antics were short-lived with China bringing down the hammer on the company over alleged customer data misuse.

Fuelling further fears, the Chinese government then went on to announce a crackdown on for-profit tutoring companies. A move said to be an effort in getting a hold on the increasing costs of education in the country.

Long-term vision for China shares

While the pressure mounted against Mr Douglass and his fund’s large weighting towards such investments, the prolific investor remained steadfast to his thesis. Specifically, Douglass continues to be optimistic about the lifting of Chinese middle-class incomes for the next 20 years.

A message that investing great Ray Dalio seems to also be reverberating. In a recent LinkedIn post, Dalio said:

To understand what’s going on you need to understand that China is a state capitalist system, which means that the state runs capitalism to serve the interests of most people and that policymakers won’t let the sensitivities of those in the capital markets and rich capitalists stand in the way of doing what they believe is best for the most people of the country.

The post What are the risks of investing in China shares like Tencent? appeared first on The Motley Fool Australia.

More reading

• Tencent share price plummets 10%, here’s what it means for ASX investors
• How China’s war on tech companies can hit ASX shares where it hurts
• What’s gone wrong with China shares like Tencent lately?
• These ASX 200 CEOs have the most wealth tied up in their companies
• 2 high-yielding ASX 200 dividend shares

Motley Fool contributor Mitchell Lawler 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 Alibaba Group Holding Ltd. 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.

from The Motley Fool Australia https://ift.tt/3xsoeGP

The Crown Resorts Ltd (ASX: CWN) share price is travelling higher today despite the Victorian Government’s hasty announcement yesterday.

At the time of writing, Crown shares are swapping hands for $8.92, up 2.06%.

Crown updates Melbourne operating conditions

A possible catalyst for the Crown share price reaching higher today could be investors bargain hunting. The company’s shares are not far off their 52-week low of $8.06.

In a statement to the ASX this morning, Crown advised that it has made a list of changes to its business operations.

This comes after the Victorian Government announced a snap 7-day lockdown yesterday for the entire state as COVID-19 cases rise.

In response, Crown closed all gaming activities, food and beverage, retail, banqueting and conference facilities last night.

The casino and resorts operator stated that hotel accommodation will continue only for approved purposes.

Furthermore, Crown will pay its Melbourne employees their rostered hours and salaries over the week-long lockdown.

Unfortunately, this is now the sixth lockdown that Victorians have had to endure. While most of them have been for a number of weeks, others have been for several months.

With no end in sight, this could be a regular occurrence until vaccination rates begin to rise.

About the Crown share price

It’s been a disastrous time for Crown shares, recording heavy falls since the beginning of June.

AUSTRAC began investigating potentially serious breaches with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws by Crown Perth. In addition, Crown Melbourne has been having significant problems renewing its gambling licence in Victoria.

This led to the Crown share price dropping from its 52-week high of $13.32 to a low of $8.61 late last month.

Only time will tell if the company can regain the trust of authorities and continue to operate Australia’s largest casinos.

The Crown share price is hovering 4.4% down over the past 12 months and is down 9.9% year to date.

The post Crown (ASX:CWN) share price edges higher despite Victorian lockdown appeared first on The Motley Fool Australia.

More reading

• Crown (ASX:CWN) share price gains as Coonan plans to step down
• Crown (ASX:CWN) share price up despite Crown Melbourne CEO exiting
• ASX 200 Weekly Wrap: ASX grinds to a halt following new all-time high
• These were the worst performing ASX 200 shares in July
• These were the worst performing ASX 200 shares last week

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.

from The Motley Fool Australia https://ift.tt/3lylh5d

There are a lot of growth shares for investors to choose from on the Australian share market.

To narrow things down, I have picked out three ASX growth shares that are highly rated. Here’s what you need to know about them:

Altium Limited (ASX: ALU)

The first ASX growth share to take a look at is Altium. It is the printed circuit board (PCB) design software provider behind the Altium Designer and Altium 365 platforms. These platforms are used in the design process of everything from automotive and aerospace to consumer electronics and medical devices. Demand looks set to increase for this type of software over the next decade thanks to numerous industry tailwinds. These include the Internet of Things and artificial intelligence booms, which are underpinning the proliferation of electronic devices globally.

One leading broker that is positive on the company is Credit Suisse. It currently has an outperform rating and $42.00 price target on its shares.

Kogan.com Ltd (ASX: KGN)

Another ASX growth share to look closely at is Kogan. It is a growing ecommerce company which is benefitting greatly from the shift to online shopping. This has underpinned very strong customer and sales growth over the last 18 months. And while the company is going through a difficult period as tailwinds ease and inventory builds up, this appears to be more than reflected in its recent share price performance. Furthermore, recent lockdowns look set to boost sales and help the company work through its excess inventory.

Analysts at Canaccord Genuity see a lot of value in the Kogan share price. Its analysts have a buy rating and $14.00 price target on its shares. The broker believes Kogan is over the worst of its issues and believes recent lockdowns will boost its earnings momentum.

Pushpay Holdings Group Ltd (ASX: PPH)

A final growth share to look at is Pushpay. It is a leading donor management and community engagement platform provider for the faith sector. It has been a strong performer over the last few years. This has been driven by the accelerating digitisation of the church and its industry-leading technology. Demand was so strong the company reported a 40% increase in operating revenue to US$179.1 million and a 133% increase in EBITDAF to US$58.9 million in FY 2021. Looking ahead, management is forecasting further growth in FY 2022 and is planning to expand into a new market.

Jarden currently has a buy rating and NZ$2.10 (A$2.00) price target on its shares.

The post 3 excellent ASX growth shares that could be buys appeared first on The Motley Fool Australia.

More reading

• The Kogan share price is down 6% this last month
• 2 beaten-up ASX shares that could be buys in August 2021
• 3 reasons why the Pushpay (ASX:PPH) share price might be too good to ignore
• 2 highly rated ASX 200 growth shares analysts love
• These 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. owns shares of and has recommended Altium, Kogan.com ltd, and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Altium, Kogan.com ltd, and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3fA9RdI

The Fortescue Metals Group Limited (ASX: FMG) share price is under pressure on Friday morning.

At the time of writing, the iron ore producer’s shares are down over 3% to $22.52.

Why is the Fortescue share price under pressure?

The weakness in the Fortescue share price on Friday appears to have been driven by another sharp pullback in iron ore prices.

According to CommSec, the spot iron ore price tumbled US$13.10 a tonne or 7.2% to US$170.05 a tonne.

This heavy decline has been driven by concerns that Chinese regulators will increase production limits on steel producers amid weakening downstream demand.

As you might expect, it isn’t just the Fortescue share price that is under pressure on the news. A number of other ASX miners with exposure to the steel making ingredient are also tumbling lower today.

Here’s a summary:

• The BHP Group Ltd (ASX: BHP) share price is down 2.5% to $51.81.
• The Champion Iron Ltd (ASX: CIA) share price is down 3% to $6.71.
• The Mount Gibson Iron Limited (ASX: MGX) share price has tumbled 3% to 76.5 cents.
• The Rio Tinto Limited (ASX: RIO) share price has fallen over 2% to $129.15.

This has led to the S&P/ASX 200 Resources index thoroughly underperforming the market today with a 1.7% decline.

Is this a buying opportunity?

Analysts at Macquarie currently have an outperform rating and $27.00 price target on the Fortescue share price. This implies potential upside of 20% over the next 12 months before its generous dividends.

And while this recommendation was made prior to recent weakness in the iron ore price, it is worth noting that prices are still in line with Macquarie’s expectations.

For example, in June Macquarie was forecasting the iron ore price to finish the calendar year at US$158 a tonne. Whereas in calendar year 2022 it expects an average price of US$120 a tonne, before reducing to an average if US$95 a tonne in 2023.

As a result, its analysts may see the recent weakness in the Fortescue share price as a buying opportunity for investors.

The post Why the Fortescue (ASX:FMG) share price is tumbling lower on Friday appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 mining giants making moves towards renewables
• Fortescue (ASX:FMG) share price falls on COVID-19 scare
• Why the Fortescue (ASX:FMG) share price is struggling this week
• 4 reasons why the Fortescue (ASX:FMG) share price could still be attractive
• Why the Fortescue (ASX:FMG) share price has fallen off a cliff

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.

from The Motley Fool Australia https://ift.tt/3itpiGq

The Bank of Queensland Limited (ASX: BOQ) share price has gained a whopping 61% over the past 12 months.

And no wonder. After finding itself on the wrong foot in late 2020, the regional bank has released a barrage of good news.

Right now, the Bank of Queensland share price is $9.20. Exactly 12 months ago it was sitting at just $5.71.

Let’s take a look at what’s been driving the bank’s shares lately.

The year that’s been for the Bank of Queensland

The Bank of Queensland was relatively quiet this time last year.

In fact, the only news the bank released between July 2020 and September 2020 was of extra expenses to be added to its 2020 financial year results.

Some of those expenses included an $11 million expense brought about due to underpayment of staff. The bank came across the underpayments in an internal review and vowed to repay any discrepancies.

Additionally, it reported it expected its loan impairment expense for the financial year to be $175 million. The Bank of Queensland share price fell 7.2% on the back of the news.

Then, the bank released its results for the 2020 financial year in October.

While it didn’t do as well as the prior financial year, it managed to scrape in a $115 million net profit after tax. The bank’s shares increased by 5.1% following its results.

But the big news from the Bank of Queensland over the past 12 months has to be its acquisition of Members Equity Bank (ME Bank).

The acquisition was first announced in February, when the Bank of Queensland announced it was undergoing a $1.35 billion capital raise to cover the cost of the acquisition.

Bank of Queensland’s shares were frozen on 18 February as the bank readied itself to break the news. The Bank of Queensland share price gained 12.7% when trading was reinstated on the 23 February.  

ME Bank was, unfortunately, accused by the Australian Securities and Investments Commission (ASIC) of breaching 2 sections of the Credit Act in March.

Finally, the acquisition was officially finalised on 1 July.

Bank of Queensland share price snapshot

It likely comes as no surprise the Bank of Queensland share price has been doing well recently.

It has gained 21% since the start of 2021, and is up 2.3% over the last month. At the time of writing, shares are swapping hands for $9.20 apiece, up 0.22% on the previous closing price.

The post The Bank of Queensland (ASX:BOQ) share price is up 61% in a year. Here’s why appeared first on The Motley Fool Australia.

More reading

• ASX 200 flat, Lynas soars, City Chic jumps
• Why the Bank of Queensland (ASX:BOQ) share price is climbing today
• Is the BOQ (ASX:BOQ) share price a buy for dividends?
• Top brokers name 3 ASX shares to buy next week
• The Bank of Queensland (ASX:BOQ) share price is having a good year. Here’s why

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3fAzwTu

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.

Amazon‘s (NASDAQ: AMZN) latest earnings results were enough to beat analysts’ expectations, but the stock fell after management issued lower-than-expected guidance for the third quarter. After reviewing management’s comments on the earnings call, it appears this is another case of the market missing the forest for the trees.

As of this writing, the stock is down 6.5% since the earnings report, but strong demand from new Prime customers is causing Amazon to spend aggressively to support growth. The e-commerce giant’s record of generating high returns on capital should give investors a good reason to pick up some shares during this pullback.

Watch for another revenue acceleration

Amazon posted revenue growth of 27% year over year in the second quarter, or 24% adjusted for currency fluctuations. That’s a sharp deceleration from the first quarter’s 41% currency-adjusted growth. But the biggest problem for investors was management’s third-quarter guidance, which calls for year-over-year revenue growth to further decelerate to between 10% and 16%.

As a result, many have overlooked the increased capital spending. When Amazon has increased such investments in the past, it usually results in an acceleration in revenue growth soon after.

For the trailing 12 months ended June 30, capital expenditures totaled $47.2 billion, up 144% from the year-ago period.

This spending is going toward a number of internal projects, but most importantly, Amazon is expanding its fulfillment capacity as CFO Brian Olsavsky explained during the earnings call, “This is all part of a multiyear investment cycle for us. Unit volumes, while obviously growing at lower rates off last year’s large comp, continue to remain high, and we see strong demand for [fulfilled by Amazon] and third-party sellers.”

Olsavsky also mentioned the investments are going toward building out the last-mile and middle-mile delivery capabilities of Amazon’s transportation network to support fast-shipping offers for customers.

The pandemic has presented Amazon with an excess demand problem. With 50 million new Prime members added during the pandemic, Amazon is having to quickly ramp up spending to support its much larger customer base.

Last year, Amazon saw a notable acceleration in revenue growth from the first to the second quarter, partially thanks to its addition of greater fullfillment capacity and hundreds of thousands of employees. “This allowed our revenue growth rate to jump to the 35% to 45% range and remained at that level through Q1 of this year when we had 41% growth,” Olsavsky said during the recent earnings call.

While investors shouldn’t expect Amazon to deliver 40% growth rates again, the company could see a return to levels of 20% or more in 2022.

A new investment cycle can drive big returns

Amazon’s track record of fueling revenue growth after stepping up its capital spending goes back several years.

Between 2009 and 2011, capital expenditures increased from $373 million to $1.81 billion, or an increase of 386%. Over that same period, Amazon revenue grew 96%, speeding up from the 65% growth it recorded from 2007 to 2009.

Data by YCharts.

In 2011, Amazon said the increase in capital spending was to drive continued business growth, Amazon Web Services, and additional capacity to support fulfillment operations. You could take that statement from 10 years ago and plug it into the latest earnings call. Those are the same key areas the company continues to invest in going forward.

Given Amazon’s record of driving high returns on incremental capital spending, investors should consider adding shares of this leading growth stock during the post-earnings decline.

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

The post 1 thing the market got wrong in Amazon’s earnings report appeared first on The Motley Fool Australia.

More reading

• Amazon investors get a reality check
• 3 reasons Microsoft needs to reveal Azure’s financials
• Why is everyone talking about Amazon stock?
• 3 things you missed in Amazon’s earnings report
• Here are 4 sure-fire ways to catch the next 10-bagger

John Ballard owns shares of Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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.

from The Motley Fool Australia https://ift.tt/37q3mp4