Tag: Motley Fool

The S&P/ASX 200 Index (ASX: XJO) went up 0.3% today to 7,081 points.

Here are some of the highlights from the ASX:

Macquarie Group Ltd (ASX: MQG)

The investment bank reported its FY21 result today. Its share price dropped 0.35% in reaction.

Macquarie reported that net profit grew 10% year on year to $3 billion. The second half of FY21 saw Macquarie generate $2 billion of profit, up 59% on the prior corresponding period.

The assets under management (AUM) fell 6% to $563.5 billion over the year.

Macquarie said that its financial position comfortably exceeds regulatory minimum requirements. It had surplus capital of $8.8 billion, with a bank CET1 ratio of 12.6%.

The ASX 200 share’s board declared a final dividend of $3.35 per share, bringing the FY21 dividend to $4.70 per share.

Macquarie CEO and managing director Shemara Wikramanayake spoke about the outlook:

Macquarie remains well-positioned to deliver superior performance in the medium term. This is due to our deep expertise in major markets, strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions, an ongoing program to identify cost saving initiatives and efficiency, a strong and conservative balance sheet, and a proven risk management framework culture.

REA Group Limited (ASX: REA)

The REA Group share price went up more than 1% after releasing its FY21 third quarter update to investors.

For the quarter, it reported that revenue after broker commissions rose 8% to $225.6 million. Operating expenses also grew 8%, leading to underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rising by 8% to $121.9 million. Including the share of profit and losses from associates, EBITDA went up 13% to $123.3 million. REA’s free cashflow went up by 5% to $65.4 million for the quarter.

The Australian residential property market saw national listings up 8%.

In terms of current trading, the ASX 200 share said the strength of the residential property market was evident in April, with increased levels of buyer enquiry underpinned by low interest rates, improving consumer confidence and healthy bank liquidity. National residential listings were up 98% year on year, with an increase in Melbourne of 127% and 116% in Sydney. The comparison period was during the COVID-19 period where listings dropped.

REA Group CEO Owen Wilson said:

Conditions are aligned for the Australian property market to continue its positive trajectory for the remainder of 2021. This momentum, combined with strategic investments made throughout FY21, positions REA for a strong finish to the year.

Magellan Financial Group Ltd (ASX: MFG)

The ASX 200 funds management company released its monthly update to 30 April 2021 today.

It reported an increase in funds under management (FUM) from $106 billion to $110.4 billion.

The global equities strategy saw FUM rise from $79.3 billion to $82.9 billion. Next, the infrastructure equities strategy saw FUM rise from $18.16 billion to $18.6 billion. Finally, the Australian equities strategy saw FUM growth from $8.56 billion to $8.9 billion.

The Magellan share price dropped by 0.4% today.

More reading

• The RBA just told us what’s going to happen with interest rates
• Telstra (ASX:TLS) and 2 other dividend shares with yields over 6% today
• Hamish Douglass loads the bag as Magellan (ASX:MFG) funds top $110bn
• How shares with massive PE ratios can be cheap
• ASX tech shares are in a world of pain. There might be more to come…

Motley Fool contributor Tristan Harrison owns shares of Magellan Financial Group. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended REA 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 Wesfarmers Ltd (ASX: WES) share price has taken a breather from its all-time record high of $56.40 in February. 

The diversified conglomerate has held up relatively well compared to peers such as Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) which have slumped in light of normalising consumer behaviour. 

At the market close today, the Wesfarmers share price was trading up 0.7% at $54.26.

Is the Wesfarmers share price in the buy zone? 

Macquarie weighed in on the Wesfarmers share price after its conference presentation on 5 May.

The broker looked to be impressed by the opportunities at hand to grow the diversified business. These include the expansion in chemicals, lithium production and growing regional distribution centres for Bunnings. 

The note also highlighted the company’s commitment to absorbing as much of the cost pressures as possible. This points to exploring opportunities with alternative suppliers to maintain competitiveness. 

The Macquarie rating is outperform with a $56.60 target price. 

Wesfarmers presentation highlights 

Surging online sales 

Wesfarmers has made a significant effort to drive its data and digital capabilities, which has seen its retail online sales surge to $2.0 billion in the first half of FY21, almost higher than the entirety of FY20 online sales. 

The company intends to continue to enhance its digital capabilities and improve the customer shopping experience. In the context of its Bunnings business, this includes increased online access to product ranges, enhancements to its product finder app and continue to support click/drive & collect services. 

WesCEF eyes lithium production 

WesCEF is the chemical, energy and fertiliser arm of the company. It recently approved the final investment decision of its Mt Holland lithium project, in partnership with Chile’s leading lithium producer, SQM. 

Wesfarmers estimated its expected share of total project capital expenditure to be approximately $950 million. The current indicative timeline for the project eyes construction to start in the second half of 2021 with production to begin in the second half of 2024. 

In its definitive feasibility study, concentrator and refinery production capacity was increased from 45ktpa to 50ktpa of sustainably sourced battery-grade lithium hydroxide, with capacity for a second phase expansion. 

To add some perspective, Vulcan Energy Resources Ltd (ASX: VUL) and its flagship Zero Carbon Lithium project is targeting 40ktpa lithium hydroxide production. 

Accelerating the growth of Kmart 

Wesfarmers has made Kmart the focal point of its department store business. This has seen 22 large format Target stores converted to Kmart stores, and 52 Target Country stores converted to the new K Hub format. 

The company plans to continue to support Kmart’s growth by accelerating its network growth to address key market gaps. This will hopefully unlock further scale benefits and deliver an earnings uplift for the group. 

More reading

• 2 high quality blue chip ASX 200 shares rated as buys
• ASX 200 Weekly Wrap: Shares have average week but a great month
• Wesfarmers (ASX:WES) share price on watch as Bunnings buys Beaumont Tiles
• 2 quality ASX dividend shares for May
• What’s going on with the Wesfarmers (ASX:WES) share price today?

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths 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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It’s been an uneventful week for the Commonwealth Bank of Australia (ASX: CBA), but not for its share price.

While the bank hasn’t graced the market – or the broader mediascape – with much press-stopping news, shares in the bank have continued to creep upwards.

The Commonwealth share price closed at $93.92 today, 1.05% higher than yesterday’s close. That adds to a fantastic week’s performance from the bank’s share price which has gained 4.2% since Monday morning.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 0.2% this week.

Commonwealth Bank share price approaching its all-time high

Today, for the second week in a row, the Commonwealth Bank share price hit a 52-week high. The milestone was achieved at today’s intraday high when shares in the bank were swapping hands for $94.10.

Last fortnight, The Motley Fool Australia reported the Commonwealth share price looked like it had a chance to smash its previous all-time high of ~$96 (which it reached in 2015) this year.

While it’s not quite there yet, today undoubtably raised some hopes.

What’s new with CBA this week?

The Commonwealth share price started the week off on a good foot. Last Sunday, The Motley Fool Australia reported that Morgan Stanley analysts had kept their underweight rating but lifted the price target for the bank’s shares. The broker’s new price target for Commonwealth shares was $83.00.

Morgan Stanley suspected provision releases and more modest rises in underlying loss rates would support the earnings per share (EPS) upgrade cycle continuing. This could support the bank’s dividend to increase over the coming years.

On Tuesday, the banking giant announced it acquired health technology provider Whitecoat.

Whitecoat runs Australia’s largest digital healthcare services directory, allowing patients to find and book appointments with health service providers. Whitecoat also offers a digital health payment and claims solution with the ability to process payments through Medicare, private health insurance, and government schemes.

The Commonwealth Bank Group’s business banking executive Mike Vacy-Lyle said the acquisition supported the bank’s focus on healthcare as a growth sector, and it aimed to provide the best digital services and experiences to its customers. He said:

We recognise that by thinking differently and broadening our services, we can help our customers run their businesses more effectively.

More reading

• Australia’s trust in big banks up 19% in just 2 years: report
• Blue chip ASX 200 shares breaking out into 52-week highs
• ANZ Bank (ASX:ANZ) share price hit by broker downgrade post results
• Is it time to give the A2 Milk (ASX:A2M) share price another chance?
• Here are the US shares that ASX investors were buying last week

Motley Fool contributor Brooke Cooper 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 Cirralto Ltd (ASX: CRO) share price has been a huge mover on the S&P/ASX All Technology Index (ASX: XTX) this year, rising from just one cent to a high of over 11 cents per share.

The Cirralto share price is already in the news today and has closed down 7.3% at 6.3 cents per share after its latest investor presentation.  

Let’s take another look.

Cirralto’s ups and downs

Long-time investors may be familiar with the Cirralto story. It’s a technology investment company based in Australia, which acquires, develops and commercialises tech assets that modernise IT systems.

Data storage, migration and cloud-based computing are all key areas for the company. Its products include PoolBox, Flash Convert, Synk’d and its latest payment service, Spenda.

The company has attempted to enter the buy now, pay later (BNPL) space as a B2B offering over the past few months, which saw its share price surge and reach 12-month gains of 4,810% in March. 

Throughout this period its often seen daily gains of more than 200%, punctuated by significant weekly and monthly losses.

At its high, it raised $18 million in capital to launch Spenda in the BNPL market. After a period of work behind the scenes and share price drops, which perhaps reflected the ongoing investor uncertainty in this company, it upgraded its pay services at the beginning of May.

It was potentially seen as being late to the party after such high initial BNPL interest, and that appears to have hurt trust in the company. The company’s latest financial reports show a 25% increase in cash receipts, 12% increase in customer numbers, and 18% increase in merchant turnover.

Still, the Cirralto share price falls.

The company believes Spenda has a market advantage because it can provide payment services cheaper than most of its rivals on the market, and it has a higher level of integration with a range of existing platforms.

It’s currently tightly marketing Spenda in key areas, where it hopes to create notable efficiencies in connecting consumers, retailers and manufacturers throughout the payment process.

Foolish takeaway

Despite seemingly positive reports from the company this month, some investors clearly believe it has been overhyped. The Cirralto share price has lost 22% in the past month and has declined on 13 of the past 30 days. 

It’s easy to see why Cirralto could drive this kind of hype. It’s a company that appears to have many of the right pieces: strong sales growth, cloud-based IT systems, BNPL technology, high profile financial partnerships and a huge market capitalisation for a six-cent share.

But it’s also proven a little nerve-wracking, and some director share sell-offs in hard times create an uneasy feeling. It’s also been exceptionally volatile in a period that’s seen a boom in ASX technology shares, with no shortage of quiet achievers on the index. 

More reading

• What’s going on with the Cirralto (ASX:CRO) share price today?
• Could this quarterly sink or swim the Cirralto (ASX: CRO) share price?

Motley Fool contributor Lucas Radbourne-Pugh 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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SSR Mining Inc CDI (ASX: SSR) shares were among the top performers on the All Ordinaries Index today after the company released its financial statements for the first quarter of 2021. By market close, the SSR share price had jumped 7.81% higher to $22.10.

SSR Mining is a huge gold exploration company spread across the United States, Turkey, Canada, and Argentina. It also has a global pipeline of development and exploration assets in the US, Turkey, Mexico, Peru, and Canada. 

In 2019, the company’s four operating assets produced over 720,000 ounces of gold and 7.7 million ounces of silver. 

Financial reports

The SSR Mining share price had a bumper end to the week following the company’s release of its quarterly results. During the quarter, SSR delivered production of 196,094 gold equivalent ounces at current commodity prices of $1,004 per gold equivalent ounce, putting it on track to meet its full-year guidance ranges.

SSR generated cash flows from operating activities of $145.2 million and free cash flow of $76.6 million in the first quarter, which represented modest increases on the first quarter of 2020. 

The company also reported first-quarter attributable net income of $53 million, or 24 cents per share. It now has over $900 million in consolidated cash.

SSR Mining, along with most other large multinationals, has been hit by the impacts of COVID-19. As such, it’s cash assets and marketable securities were down on the first quarter of 2020. However, apart from Turkey’s continual government-led slow-downs of the company’s mining operations, SSR appeared bullish about the immediate future.

In its quarterly update, SSR also highlighted the focus on its environmental and sustainability programs. Following its recent merger with Alacer Gold, the company provided an update on its “new suite of sustainability policies”. SSR Mining is currently aiming for net-zero carbon emissions by 2050, in line with many other large resource companies.

SSR share price snapshot

The SSR share price has been rebounding lately, up by around 11% over the past month. Year to date, however, the company’s shares are still down by around 15%. They have also dropped more than 28% over the last 12 months. The company has a current market capitalisation of around $413 million. 

More reading

• Why the Carnaby Resources (ASX:CNB) share price rocketed 11%
• 3 quality mid cap ASX shares rated as buys
• Are there buying opportunities among ASX COVID fallen stars?
• Insiders have been buying Breville (ASX:BRG) and this ASX share
• This broker thinks you should buy the TPG (ASX:TPG) share price dip

Motley Fool contributor Lucas Radbourne-Pugh 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 Carnaby Resources Ltd (ASX: CNB) share price was through the roof today. By close of trade, shares in the mineral exploration company were trading for 30 cents each – up 11.11%.

The significant price rise came after the company announced it detected “strong” induced polarisation (IP) signals at its gold mine in Queensland.

Let’s take a closer look at the announcement.

What boosted the Carnaby share price?

In a statement to the ASX, Carnaby Resources said 4 “strong IP conductors…have been generated at the Nil Desperandum Prospect [in Mt Isa, Queensland] …” The company says the results mean it now has immediate walk-up targets for drilling.

IP is a method to locate deposits of ore, including gold and copper, in surfaces without the need to first dig into the ground.

After today’s result, the company said it would bring forward drilling in the area to next week. It also said it conducted further IP tests at its Mount Birnie and Duchess Prospects. These will be announced “shortly”, according to the statement.

Investors are have been buoyed by today’s results, judging by the Carnaby share price action.

Management commentary

Carnaby managing director Rob Watkins said of today’s news:

Nil Desperandum and our other Greater Duchess Copper Gold prospect areas are rapidly emerging as an exceptional camp of high-grade copper gold targets…

He added:

We are genuinely excited about the targets and as such we have bought forward the 4,000m RC drilling program which will now commence next week.

Copper and gold commodity prices

Historical finds at the prospect have mostly been copper and gold. Both gold and copper have seen their prices rise over the past month – copper much more so. The reddish-brown metal is up 14% over the month and 32.8% since the beginning of the year to US$4.67 per pound. Gold, meanwhile, is only 3.5% higher in a month and down 4.14% in 2021. It is trading for US$1,817.83 per troy ounce.

Surging demand for clean technologies has been fuelling the demand for copper. Some have even been speculating that the copper price may be in a bubble.

According to the website Trading Economics, lower US Treasury yields, and a weaker US dollar are both pumping the current price of gold. It also cited the metal’s safe-haven appeal to investors, as some worry about rising coronavirus case numbers in Japan and India.

Carnaby Resources share price snapshot

Over the past 12 months, the Carnaby Resources share price has increased by around 440%. Only 2 days ago, the company had another double-digit growth day when it announced another gold discovery.

In the last half-year, however, the company’s value has decreased by 19.2%.

Carnaby Resources has a market capitalisation of $46.5 million.

More reading

• Carnaby (ASX:CNB) share price strikes gold and shoots 14% higher

Motley Fool contributor Marc Sidarous 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 the mid cap space there are a good number of shares that have the potential to grow strongly over the next decade, potentially generating market-beating returns for shareholders.

Three that could be great options for long-term focused investors are listed below. Here’s why they are highly rated:

Bravura Solutions Ltd (ASX: BVS)

The first mid cap ASX share to look at is Bravura. It is a leading provider of software solutions for the wealth management and funds administration industries. Bravura has a portfolio of solutions that are both high quality and have significant market opportunities. This is particularly the case for the Sonata wealth management platform, which is used by a number of large financial institutions.

Earlier this week, Goldman Sachs retained its buy rating and lifted its price target on the company’s shares to $3.90.

Collins Foods Ltd (ASX: CKF)

Another mid cap ASX share to consider buying is Collins Foods. It is one of the largest quick service restaurant operators in the ANZ region. It currently operates 251 KFC stores in Australia, 45 KFC stores in Europe, and 16 Taco Bell across Queensland and Victoria. Positively, management still sees plenty of room to expand its network in the future, particularly in the underpenetrated European market. Combined with the continued popularity of its brands, this should be supportive of further earnings and dividend growth long into the future.

UBS currently has a buy rating and $11.65 price target on its shares.

Kogan.com Ltd (ASX: KGN)

A final mid cap ASX share to consider is Kogan. It is one of Australia’s leading ecommerce companies and has been growing at an explosive rate over the last 12 months. And while its growth is now slowing as tailwinds ease, its long term potential remains as bright as ever. This is thanks to the ongoing shift to online shopping and its strong market position.

One broker that believes that a recent pullback in the Kogan share price is a buying opportunity is Credit Suisse. Last week it retained its outperform rating and trimmed its price target to $17.93. This is materially higher than where it trades today.

More reading

• Are there buying opportunities among ASX COVID fallen stars?
• Broker tips Bravura (ASX:BVS) share price to storm 20% higher
• ASX 200 tech shares under pressure after Nasdaq selloff
• a2 Milk and Zip were among the most traded ASX shares last week
• Why the Kogan (ASX:KGN) share price was sold off in April

James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd and Kogan.com ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd, Collins Foods Limited, and Kogan.com 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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ASX shares that were favourite buys well during the COVID-19 crash have suffered a reversal of fortunes.

The question is whether these fallen angels now represent value.

The irony shouldn’t be lost on investors as these ASX shares have been the antithesis of value given their lofty valuations.

Best ASX COVID winners turn losers

Some obvious examples of high flying COVID winners that have dropped out of favour recently include tech darlings like the Afterpay Ltd (ASX: APT) share price and Altium Limited (ASX: ALU) share price.

You can also add in ASX retailers that have been able to make the most of the pandemic lockdown. These are the Kogan.com Ltd (ASX: KGN) share price, Coles Group Ltd (ASX: COL) share price and Adore Beauty Group Ltd (ASX: ABY) share price.

There’s heated debate on whether the recent downfall in these ASX shares represent a buying opportunity. But UBS is convinced that at least one of them is a “buy” now.

Swan turns into ugly duckling

This is online beauty products retailer Adore Beauty. The Adore Beauty share price tumbled to its lowest point since its October 2020 IPO on Friday when it closed at $3.68.

Investors got spooked by its latest trading update even though management expected FY21 sales growth of 43% to 47%. This translates to $173 million to $178 million.

But this isn’t enough to keep investors onside. UBS acknowledged that the updated guidance implied a 2HFY21 sales figure of between $77 million and $82 million.

That’s 3% to 9% below UBS’ estimates and between 11% and 16% under consensus forecasts.

Why you should buy this former ASX COVID winner

ASX shares trading on sky-high valuations have no room to disappoint. This is especially so in the current environment when investors are increasingly starting to question if equities have overshot their fundamentals.

UBS does not share these concerns regarding the Adore Beauty share price. If anything, it believes the sell-off is overdone.

“While the slowdown in momentum was more than expected, our medium-term thesis has not changed, with the stock offering an attractive entry point,” said UBS.

“It has an opportunity to ride structural tailwinds (online beauty market growing ~26% pa), lift brand awareness and benefit from maturing customer cohorts.”

Adore Beauty share price looking attractive

The broker pointed out that the Adore Beauty share price is trading around 45% below its IPO price. It is also cheaper than the Temple & Webster Group Ltd (ASX: TPW) share price on an enterprise value/sales to growth ratio.

UBS reiterated its “buy” rating on the Adore Beauty share price with a 12-month price target of $5.60 a share.

More reading

• ASX tech shares are in a world of pain. There might be more to come…
• The Afterpay (ASX:APT) share price breaks below $100
• Why Adore Beauty, Appen, HUB24, & News Corp shares are charging higher
• Brokers name 3 ASX shares to buy now
• Why the Adore Beauty (ASX:ABY) share price is rebounding 7% today

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Adore Beauty Group Limited and Altium. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and COLESGROUP DEF SET. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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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Every so often, I like to take a look to see which shares have experienced meaningful insider buying. This is because insider buying is often regarded as a bullish indicator, as few people know a company and its intrinsic value better than its own directors.

A number of shares have reported meaningful insider recently. Here are a couple which have caught my eye:

Breville Group Ltd (ASX: BRG)

According to a change of director’s interest notice, the Chairman of this appliance manufacturer has been topping up his position.

The notice reveals that Steven Fisher bought 1,221 shares via an on-market trade on 29 April. The Chairman paid a total of $32,119.14 for the shares, which equates to an average of $26.30 per share. This purchase lifted Mr Fisher’s holding to a total of 130,000 Breville shares.

With the Breville share price now trading at $25.83, investors have the opportunity to invest at an even cheaper price.

Analysts at UBS certainly think this would be a good idea. This morning the broker retained its buy rating and $35.70 price target on the company’s shares.

Based on the current Breville share price, this price target represents potential upside of 38% over the next 12 months.

Metcash Limited (ASX: MTS)

Another change of director’s interest notice reveals that one of this wholesale distributor’s new directors has already been buying shares. According to the notice, Margaret Haseltine bought 57,839 Metcash shares within just a few days of her appointment to the board.

The release advises that Ms Haseltine snapped up the shares through on-market trades between 4 May and 5 May for an average of ~$3.46 per share. This represents a total consideration of $199,784.90.

One broker that would be supportive of this purchase is Morgan Stanley. In March the broker put an overweight rating and $4.20 price target on the company’s shares.

So, with the Metcash share price currently trading at Ms Haseltine’s buy price of $3.46, this implies potential upside of 21% over the next 12 months.

More reading

• 2 stellar ASX growth shares rated as buys
• These are the 10 most shorted shares on the ASX
• Are Woolworths (ASX:WOW) shares too expensive?
• 2 excellent ASX growth shares tipped as buys
• Looming grocery price shock to impact on these ASX shares

Motley Fool contributor James Mickleboro 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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Things have gone from bad to worse for the TPG Telecom Ltd (ASX: TPG) share price. Its shares have slumped almost 40% since its merger between TPG Telecom Ltd and Hutchinson Telecommunications Ltd on 30 June 2020.

However, broker Morgans thinks the stock could be a ‘buy the dip’ opportunity. 

Why has the TPG share price underperformed? 

The TPG share price performance has been keeping pace with its competitor, Telstra Corporation Ltd (ASX: TLS). It wasn’t until Telstra announced its plans in March to restructure its business that a divergence in performance began to emerge. 

Despite TPG’s solid financial performance, the company’s management has undergone a series of significant changes. 

The TPG share price took a 7% dive to $6.40 on 26 March after the announcement of its 2020 annual report and the resignation of founder David Teoh. 

Brokers were quick to critique the founder’s resignation.

Credit Suisse said at the time that the resignation created a potential “share overhang”. This is because David Teoh, his family and associates hold a 17.1% interest in TPG Telecom, with 80% of the holding subject to an escrow until the end of June 2022. The broker notes that his exit could see other shareholders exit their holdings as well. 

To add further insult to injury, the TPG share price took another 5.50% fall to $5.25 on Thursday after the resignation of CFO Stephen Banfield. 

Why the TPG share price could be a buy

Morgans has retained an add rating for TPG shares on Friday. The broker views the short-term share price weakness as a buying opportunity but reduced its target price from $8.11 to $7.17 to adjust to capex forecasts. 

TPG has not provided any concrete figures regarding year to date performance. However, in its chairman’s address to shareholders presentation on 6 May, management said that “we are tracking well against our forecast for the year”. Morgans assumes that the company is broadly comfortable with FY21 earnings.  

The TPG share price is fetching $5.45 at the time of writing, up 4%. 

More reading

• Telstra (ASX:TLS) and 2 other dividend shares with yields over 6% today
• TPG (ASX:TPG) share price tumbles 6% as CFO resigns
• Blue chip ASX 200 shares breaking out into 52-week highs
• Why the Telstra (ASX:TLS) share price is at a new 52-week high
• Telstra (ASX:TLS) share price edges higher despite record $1.5 million fine

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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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