Tag: Motley Fool

The Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price is under significant pressure on Tuesday morning.

At the time of writing, the biopharmaceutical company’s shares are down 14.5% to $1.90.

This decline means the Paradigm share price is now down 35.5% over the last 12 months.

Why is the Paradigm share price crashing?

Investors have been selling down the Paradigm share price on Tuesday following the release of an update on the Investigational New Drug (IND) application it submitted to the US Food and Drug Administration (FDA) in March.

As you might have guessed from the weakness in the Paradigm share price, the update was not an overly positive one.

What’s been happening?

In June, Paradigm submitted a response to the FDA’s six questions relating to Paradigm’s IND submission.

According to today’s announcement, the company has now received a written response from the US FDA. This reveals that the regulator has accepted Paradigm’s responses to five of its six questions.

As a result, the FDA requires further clarification on one remaining question. This is in regard to the non-clinical interpretation and clinical mitigation relating to one of Paradigm’s recently completed GLP non-clinical toxicology studies.

Paradigm notes that it conducted 26 non-clinical studies in 2020 at the request of the US FDA. Of the 26 non-clinical studies conducted, the FDA is seeking clarification on only one rat study.

Paradigm will now work with expert clinical and non-clinical consultants to prepare a response. It anticipates this will be submitted within a month.

Paradigm’s Chief Medical Officer, Dr Donna Skerrett, remains optimistic that this outstanding question can be resolved.

She explained: “For new indications that impact large populations, such as osteoarthritis, a thorough and iterative process with the FDA for initiating the pivotal registration studies is common practice. Even though the pace of progressing the clearance process has been slowed due to COVID-19 resulting in all communications being written, we are confident that we can address the FDA’s one remaining question. We look forward to resolving the one outstanding question with the FDA and moving froward with our pivotal program in the US, Europe and Australia.”

However, judging by the Paradigm share price performance today, some investors aren’t as confident as the company is.

The post Why the Paradigm (ASX:PAR) share price is sinking 14% on Tuesday 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 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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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 (NASDAQ: AMZN) stock tumbled Friday after the company missed revenue estimates and surprised the market by calling for much slower revenue growth in the third quarter.

Management expects the top line to increase just 10%-16% in the third quarter, a clear sign that the pandemic bump has ended and that the tech giant will now face difficult comparisons over the next few quarters. While that was the main takeaway from the report, there are some other key pieces of information that investors should be aware of.

Demand is still outstripping capacity

Amazon has made a huge investment over the last year to expand its capacity by adding fulfillment centers and ramping up hiring. After the last four quarters, the company has spent a whopping $52 billion in capital expenditures, which may be a record for any business, and has added 460,000 new employees.

However, that still doesn’t seem to be enough, as the company is hustling to add more capacity in the second half of the year even as its year-over-year growth rate has slowed. In response to a question about per-unit fulfillment costs on the earnings call, CFO Brian Olsavsky said, “It usually takes a multiyear period to tame those assets. And we’ve literally nearly doubled our network here in the last 18 months from a size standpoint.”

Prime membership surged during the pandemic, which will boost long-term demand, but it also strains Amazon’s logistics network further as the order minimum for free shipping on non-Prime orders no longer applies for those customers. Olsavsky acknowledged on the earnings call that the company’s one-day delivery percentage had dropped and had not yet returned to pre-pandemic levels.

High demand is a good problem to have for Amazon, but it also means that the investment cycle it began last year still has a long way to go.

Amazon is feeling the labor shortage

In addition to capacity constraints, Amazon is also getting squeezed by the labor shortage. Olsavsky commented:

The other thing is wage pressure has become evident. We’ve talked about this a bit. The wage increase for — that we normally would do in October, we pulled forward into May. We’re spending a lot of money on signing and incentives. And while we have very good staffing levels, it’s not without a cost. It’s a very competitive labor market out there. And certainly, the biggest contributor to inflationary pressures that we’re seeing in the business.

The company expects that pressure to continue as it ramps up hiring in the second half of the year toward the holiday season. Higher wages and a tight labor market could squeeze profits as Olsavsky’s comment about inflationary pressure indicates. For the third quarter, Amazon guided for operating income to be down from a year ago, at $2.5 billion-$6 billion, down from $6.2 billion in Q3 2020.

Separately, a New York Times investigation in June reported that the company’s turnover rate is so high, with the average warehouse worker staying just eight months, that some execs worry it will run out of potential hires. That challenge may explain Jeff Bezos’ promise to do better by his employees in his final shareholder letter as CEO.

The international biz is out of the red

For a long time, Amazon was burning cash in its international e-commerce segment as the company built out infrastructure around the world. It seemed reasonable to question whether the company would ever make a profit outside of North America, especially as it had taken a long time for North American e-commerce to become a cash generator.

However, that no longer seems like a concern. Amazon just completed its fifth straight quarter of profitability in the international segment, bringing in $362 million in operating income on $30.7 billion in sales. For the first half of the year, it’s already made $1.6 billion outside of North America.

Older markets like the U.K. and Germany have long been profitable, and the company seems to be reaching a critical mass of Prime members across its international territories, which are more profitable for the company at scale. Olsavsky explained that two years’ worth of international growth had been brought forward on the same base of assets, driving profitability. The company continues to invest, recently making Portugal the 22nd country with Prime, and is focused on building out its network in the developing world, including Brazil, India, and the Middle East.

While international operating income is likely to remain volatile, the doubts about Amazon’s ability to turn a profit have been put to rest.

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

The post 3 things you missed in Amazon’s earnings report appeared first on The Motley Fool Australia.

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Jeremy Bowman 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.

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The PointsBet Holdings Ltd (ASX: PBH) share price has returned from its trading halt and is tumbling lower.

In early trade, the sports betting company’s shares are down 12% to $9.93.

Why is the PointsBet share price tumbling?

The catalyst for the weakness in the PointsBet share price on Tuesday has been the completion of its institutional entitlement offer.

According to the release, the company has raised $81 million via a 1 for 9 fully underwritten pro rata accelerated renounceable entitlement offer. This offer was strongly supported by Australian and international institutional shareholders.

These funds were raised at a 29% discount of $8.00 per share. In addition, the institutional shortfall bookbuild then cleared at $10.00, which is a 25% premium to the entitlement offer price.

In respect to the latter, the eligible institutional shareholders who did not elect to take up their entitlements (and ineligible institutional shareholders) will receive $2.00 for each entitlement sold through the auction.

What’s next?

The company will now push ahead with its institutional placement to raise a further $215.1 million at $10.00 per new PointsBet share.

After which, it will undertake a retail entitlement offer at $8.00 per share. This will bring the total raised to $400 million.

Why is PointsBet raising funds?

PointsBet is raising funds to support its North American marketing and client acquisition, technology and product development, US market access and government licensing fees, and its investment in talent and the scaling of its operations.

PointsBet’s Managing Director and Group CEO, Sam Swanell, commented: “Since inception, PointsBet’s Board and management have been working to establish and consolidate the key building blocks that have put us in the strong position we are today to pursue the expansion of the North American sports betting and iGaming opportunity.”

“Today, in addition to our profitable Australian business, we have live operations in 6 US States with iGaming live in two of these states. By December 2022 we plan to be live in at least 19 North American states or provinces. The North American sports betting and iGaming market could be a US$54bn revenue opportunity by 2033 and our strategy is to continue to invest to become a top 5 player in this market, targeting a 10% market share in all key North American jurisdictions. The Capital Raising will position PointsBet to execute this strategy,” he added.

Despite today’s decline, the PointsBet share price is still up more than 100% over the last 12 months.

The post Why the PointsBet (ASX:PBH) share price is crashing 12% lower on Tuesday 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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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 Credit Corp Group Limited (ASX: CCP) share price is on the move on Tuesday morning following the release of its full year results.

At the time of writing, the receivables management company’s shares are up 6% to $30.21.

Credit Corp share price up 6% after achieving FY 2021 guidance

• FY 2021 net profit after tax increased 11% increase in net profit after tax to $88.1 million.
• US-based net profit after tax doubled to $17.7 million.
• Near record purchased debt ledger (PDL) investment outlay of $293 million.
• Record second half gross lending volume of $105 million and record committed FY 2022 starting PDL investment pipeline of $150 million.
• Final dividend of 36 cents per share, bringing its full year dividend to 72 cents per share.

What were the drivers of this result?

According to the release, Credit Corp overcame challenging market conditions across all segments to deliver a profit after tax in line with its guidance of $85 million to $90 million.

A key driver of this was its ANZ PDL collections, which came in within 4% of FY 2020’s stimulus-induced result. This was achieved with limited organic purchasing as a consequence of reduced PDL supply arising from the temporary impact of COVID stimulus and forbearance on charge off volumes.

The result was also boosted by the acquisition of the Collection House PDL book. This helped drive improvements in segment productivity and earnings.

What did management say?

Credit Corp’s CEO, Thomas Beregi, was pleased with the company’s performance and the success of its Collection House PDL book acquisition.

In respect to the latter, he said: “We used our analytical ability to provide a great price, our operational capability to promptly integrate and uplift collections from the largest individual PDL transaction in Australian history and our financial capacity to secure timely completion of the opportunity.”

Mr Beregi also spoke positively about its US operations and believes they will be a key driver of future earnings growth.

“Our tightly integrated US platform has the operational effectiveness and infrastructure required to achieve, and surpass, our medium term objective of $200 million in annual US PDL investment,” he said.

Outlook

Also giving the Credit Corp share price a boost today is management’s commentary on the year ahead. It notes that it enters FY 2022 with considerable momentum, having invested heavily during FY 2021.

As a result, it is guiding to net profit after tax of $85 million to $95 million. This represents a 3.5% decline to 7.8% increase on FY 2021’s net profit of $88.1 million.

The post Credit Corp (ASX:CCP) share price charges 6% higher after strong FY 2021 result 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 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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A growth stock in our portfolio that multiplies 10 times in value is what we all dream of.

A rocket like that can make up for losses in other shares, plus leave plenty for you to pocket. You can own five other growth shares that are $0 losers, but you’d still have doubled your money!

But those 10-baggers, and indeed 5-baggers, are difficult to pick.

If it were easy, everyone would be doing it.

Conventional analysis just doesn’t cut it for 10-baggers

“If investors cast their eyes back over the last two decades, it’s obvious the stock market’s massive winners and 10-baggers – the likes of Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOGL) and Afterpay Ltd (ASX: APT) – have always looked overvalued and uninvestable based on conventional valuation methods,” read a memo from Ophir Asset Management.

“Many investors wielding traditional valuation tools shunned these stocks and missed out on staggering returns.”

The trouble is that these future 10-baggers are usually early-stage companies. And those growth shares usually don’t have enough history to evaluate them via traditional metrics.

“Many of the stock standard valuation metrics such as price-to-earnings (P/E) ratio or price/earnings to growth (PEG) can be completely useless when analysing immature companies,” stated the Ophir investment strategy note.

“Without years of financial data to rely on, early-stage companies and their investors must employ more creative ways to substitute these inputs.”

The Ophir team took Afterpay to demonstrate why conventional metrics fall over for many growth shares.

“How can it be valued so high when it doesn’t make a profit?… Our answer is simple: Afterpay’s valuation, such as its P/E, is so high because it is deliberately keeping the ‘E low to non-existent by reinvesting for future growth.”

So how do we measure the worthiness of early-growth companies? How can we find our next 10-bagger?

Ophir suggested four ways investors can increase their chances of landing one of these beauties.

What does this growth stock actually own?

The Ophir team suggested “identifying assets” as one way to validate how an early-stage business compares to its peers.

“You list the company’s assets which could include proprietary software, products, cash flow, patents, customers/users, or partnerships,” the memo read. 

“Although you may not be able to precisely determine (outside cash flows) the true market value of most of these assets, this list provides a helpful guide through comparing valuations of other, similarly young businesses.”

Seek alternatives to revenue

Revenue growth is certainly important, but it might not be enough to understand the potential of the business.

“In addition to (or in place of) revenue, we look to identify the key progress indicators (KPIs) that will help justify the company’s valuation,” the memo read.

“Some common KPIs include user growth rate (monthly or weekly), customer success rate, referral rate, and daily usage statistics.”

The team admitted finding these other measurables can sometimes be difficult.

“This exercise can require creativity, especially in the start-up/tech space.”

Are returns greater than capital costs?

The answer to this may seem obvious but can get lost in the fervent search for the next hot growth stock.

Growth can only happen if the return on capital is positive.

“A key element in determining the quality of growth is assessing how much the firm reinvests to generate its growth,” the Ophir report stated.

“For young companies, reinvestment assumptions are particularly critical, given they allow investors to better estimate future growth in revenues and operating margins.”

Change in wind direction

Companies starting out in their journey can have their fortunes made or broken from certain events.

So the Ophir team recommends keeping an eye on the possibility of coming catalysts.

“When a young company achieves significant milestones, such as successfully launching a new product or securing a critical strategic partnership, it can reduce the risk of the business, which in turn can have a big impact on its value,” the memo stated.

“Significant underperformance can also result when competitive or regulatory forces move against a company.”

The post Here are 4 sure-fire ways to catch the next 10-bagger appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns shares in Afterpay, Alphabet and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), and Netflix. 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.

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The Afterpay Ltd (ASX: APT) share price will be in focus again today following the jump in Square Inc (NYSE: SQ) shares overnight. This came following the big news yesterday that the buy now, pay later giant has received a $39 billion takeover proposal from Square.

Why Square could impact the Afterpay share price today

Square values Afterpay at approximately US$29 billion, however, it is expected to be paid entirely in Square Class A common stock.

Square also noted that it may elect to pay 1% of the total consideration in cash.

Under the terms of the takeover, Afterpay shareholders will receive a fixed exchange ratio of 0.375 Square shares for each Afterpay share they hold on the record date.

The reference price used in the takeover announcement was US$247.26, Square’s last closing price on Friday 30 July.

But the transaction is not yet finalised, and the Square share price could wind up being materially different to the US$247.26 reference price used in the takeover announcement.

Square surges overnight

The Square share price surged 10.16% on Monday night to US$272.38.

Under the fixed exchange ratio of 0.375, this would represent around US$102 worth of Square stock.

Converting this figure back into Australian dollars at the current exchange rate, this would value the Afterpay share price at approximately $138.42.

What else should investors know?

Investors should note that the transaction is still subject to a number of conditions.

These include regulatory approvals as well as approval from both Square and Afterpay shareholders.

Square will also need approval for the quotation of new securities on the New York Stock Exchange and its planned CHESS Depositary Interest (CDIs) on the ASX.

In addition, Afterpay will seek a receipt of confirmation from the Australian Taxation Office for the availability of scrip-for-scrip capital gains tax rollover relief, ensuring the transaction can be made on a tax-free basis for Afterpay shareholders in Australia.

While both companies will be busy with getting their approvals and paperwork in order, the bottom line is that the Afterpay share price will, again, be ‘squarely’ in the spotlight on Tuesday.

The post Square up 10%. What does this mean for the Afterpay (ASX:APT) share price? appeared first on The Motley Fool Australia.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and 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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The last financial year delivered the best returns to Australian share market investors since FY07. However, one fund manager is expecting the good times to keep on rolling in this financial year, led by a surge in earnings from S&P/ASX 200 Index (ASX: XJO) shares.

Since the beginning of the new financial year, the ASX 200 has climbed a further 3.1%. This gain has largely been contributed by the materials and industrials sectors. Further growth could be on the cards if the team at Prime Value Asset Management is on the money.

Will ASX 200 shares deliver accelerated profit growth?

In its June update, Prime Value shared with its Opportunities Fund investors what it expects in the latest financial year. The fund aims to invest in 20 to 30 of the best opportunities within the ASX, irrespective of market capitalisation.

While the fund is open to companies of all sizes, its update highlights ASX 200 shares as potential FY22 winners.  

Prime Value’s Opportunities Fund delivered a 27.7% total return in FY21. The best performers within the fund included City Chic Collective Ltd (ASX: CCX), AUB Group Ltd (ASX: AUB), and Pinnacle Investment Management Group Ltd (ASX: PNI). On the other hand, its worst performers during the period included Collins Food Ltd (ASX: CKF), National Australia Bank Ltd. (ASX: NAB), and CSL Limited (ASX: CSL).

Heading into the new financial year, Prime Value resonates with Emma Fisher’s take on the importance of pricing power during inflationary environments. Yet, the fund isn’t trying to predict inflationary winners. Instead, it is eyeing off the ASX 200 shares likely to deliver earnings growth.

In its update, the Melbourne-based Australian investment manager said:

Overall, we expect FY22 to look quite different to FY21, as the drivers to performance will differ. As a base case, we expect the ongoing global vaccine rollout, significant monetary and fiscal stimulus to result in an acceleration in economic growth and corporate earnings… For example, we increased our exposure to the materials sector as a number of companies have been increasing their production and planning for expansion in commodities with strong supportive fundamentals. These investments include Mineral Resources and OzMinerals.

We have already witnessed Rio Tinto Limited (ASX: RIO) deliver exceptional earnings growth of 156%. As a result, the mining giant declared a dividend payout worth US$9.1 billion.

Funds’ top holdings

Reassuringly for investors, Prime Value practices what it preaches. The fund’s top 5 shares are all ASX 200 constituents based on its June update. Specifically, this includes Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), National Australia Bank Ltd. (ASX: NAB), and Macquarie Group Ltd (ASX: MQG).

The post ASX 200 shares to shift earnings growth up a gear in FY22 – Expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler owns shares of Commonwealth Bank of Australia and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Austbrokers Holdings Limited and Collins Foods 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 Woodside Petroleum Limited (ASX: WPL) share price isn’t having a good run lately, but investors will likely still be excited about the company’s dividend.

The oil and gas producer historically pays a dividend in March and September. It generally announces its final dividend in August and its interim dividend in February.

The Woodside share price has fallen 4% over the course of 2021. Shares in the company are currently trading for $22.14 a piece.

But how does the Woodside dividend compare to those of its peers on the S&P/ASX 200 Energy Index (ASX: XEJ)? Let’s take a look.

How the Woodside dividend stacks up

The last 2 dividends the oil and gas producer has handed out were significantly smaller than those prior.

Woodside didn’t have a great 2020 calendar. Unfortunately, its poor performance has been reflected in its dividends. Readers can find Woodside’s 2020 results here.

In fact, its final dividend of 2020 was the smallest the company has ever given its shareholders. It was just 15.29 Australian cents per share.

The previous dividend payout, given to shareholders in March 2020, was 36.24 Australian cents.

Meaning the company handed around 51.5 cents per share from its 2020 calendar year profits back to its shareholders.

That leaves Woodside with a dividend yield of 2.35%.

Additionally, All dividends Woodside has even given out have been fully franked. That means some investors may be using the dividends to reduce the amount of tax they pay.

When compared to the ASX 200 energy sector, the current Woodside dividend yield is pretty good.

Only two companies have recorded better dividend yields.

Those are Worley Ltd and Origin Energy Ltd. They parade respective dividend yields of 4.48% and 5.47%.

However, neither Worley nor Origin offer franked dividends. Meaning, for many investors, the Woodside dividend may be seen as the best in class.

The post How does the Woodside Petroleum (ASX:WPL) dividend compare to the energy sector? appeared first on The Motley Fool Australia.

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• ASX 200 Weekly Wrap: ASX grinds to a halt following new all-time high
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• Woodside (ASX:WPL) share price rises as rumours swirl over BHP deal

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.

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

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

What happened

Tesla Inc (NASDAQ: TSLA) reported record earnings last week, and the stock has climbed higher ever since. Shares got another boost today with an analyst price target increase as well as hopes the company’s China business will follow results released by domestic competitors today. At the closing bell on Monday (US time), Tesla shares had jumped about 3% from Friday’s closing price.

So what

Tesla sold more than 200,000 vehicles and surpassed $1 billion in net income for the first time in its second quarter, which ended June 30. The company also told investors it is on track to build its first Model Y vehicles at new factories in Berlin and Austin, Texas, by the end of this year. Investors are also anticipating strong numbers out of Tesla’s Shanghai factory after July delivery data was released by several Chinese electric vehicle makers today.

Now what

Following the strong quarterly performance, Mizuho Securities analyst Vijay Rakesh has increased the firm’s price target to $825, representing more than 20% upside from Friday’s closing price. The analyst believes cost efficiencies across production facilities will continue to help improve gross margins. Also Monday, Goldman Sachs Group Inc (NYSE:GS) included Tesla in a group of companies it recommends, CNBC reports.

Tesla also pointed to strong performance at its Shanghai plant as contributing to the company’s success. In the earnings release, Tesla stated: “Due to strong U.S. demand and global average cost optimisation, we have completed the transition of Gigafactory Shanghai as the primary vehicle export hub.”

Today, Chinese competitors Nio Inc (NYSE:NIO), XPeng Inc (NYSE:XPEV), and Li Auto Inc (NASDAQ:LI) all reported strong July vehicle delivery numbers, with year-over-year results jumping 125%, 228%, and 251%, respectively. Tesla investors today are anticipating that strength will flow into the company’s China sales as well.

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

The post Why Tesla stock popped Monday appeared first on The Motley Fool Australia.

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Howard Smith owns shares in Nio. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended NIO Inc. and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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The Telstra Corporation Ltd (ASX: TLS) share price has been an impressive performer in 2021.

Since the start of the year, the telco giant’s shares have stormed 25% higher.

Is the Telstra share price still good value?

There are a few ways to judge whether Telstra shares are good value. Traditionally investors would use a price to earnings ratio (which divides the Telstra share price by its earnings per share), but that isn’t necessarily a suitable method at this point due to the composition of its earnings.

It is for this reason that some analysts prefer a sum of the parts (SOTP) valuation method.

This method values all the parts of the business and ascribes a multiple to them. The total sum is then divided by the number of shares on issue, resulting in a valuation or price target.

Telstra’s sum of the parts

Fortunately, Goldman Sachs recently did a SOTP valuation for the Telstra share price, and I will take you through it now.

The broker’s SOTP valuation is based on its forecasts for FY 2023. Goldman expects:

• Mobile EBITDA of $4,387 million
• Total Fixed EBITDA of $2,081 million
• International EBITDA of $386 million

While different parts of businesses can be ascribed different multiples, on this occasion Goldman has given each of these divisions an EBITDA multiple of 7x. This results in these businesses having a combined enterprise value of $48 billion.

But it doesn’t stop there. There is also NBN compensation to consider. It expects:

• Recurring NBN EBITDA of $933 million
• One-off NBN EBITDA of $115 million

Goldman ascribes the recurring NBN earnings a 16x multiple and the one-off earnings a 1x multiple. This results in approximately $15 billion of enterprise value.

If we add these both together, we get an enterprise value of $63 billion. And then if we subtract the estimated net debt of $13.9 billion from that year and divide it by its total shares outstanding, we get a Telstra share price valuation of $4.20.

Does this make it good value?

Given that the Telstra share price is fetching $3.77 at present, this price target implies potential upside of 11.4% over the next 12 months before dividends.

In light of this above-average potential return, Goldman believes its shares are good value and has put a buy rating on them.

The post How do you value the Telstra (ASX:TLS) share price? 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 Telstra Corporation 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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