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The share price of ASX data visualisation company Pointerra Ltd (ASX: 3DP) has been on a tear over the last week, surging almost 27% higher to $0.735 by the close of trade on Friday.

The gains came after the release of Pointerra’s March quarter activities update, in which the company reported record cash receipts from customers.

In early trade this morning, the Pointerra share price is up 2.7% trading at 75.5 cents.

Company background

So, what does Pointerra do, exactly?

The ASX tech company develops cloud-based technology to help clients manage and visualise large 3D datasets. Its digital software allows clients from industries like construction, utilities or mining and resources to easily manipulate massive datasets to plan and design large development and construction projects.

The company’s software, which can be accessed through a web browser from anywhere in the world, also enables massive amounts of 3D data to be easily shared among clients and their stakeholders. However, Pointerra gives clients the ability to control who has access to their data, ensuring it also remains secure.  

What was in the quarterly update?

What really got Pointerra’s share price zooming last week was the release of its activities update for the March quarter. The company reported record quarterly cash receipts from customers of $1.37 million (up from just $0.64 million for the March quarter FY20). It was also a cashflow positive quarter for the young company, with net cashflows from operating activities coming in at $0.21 million.

Pointerra is also well-positioned to benefit from post-COVID government initiatives.

The company stated that it had seen an uptick in demand for its platform from clients in the architecture, engineering and construction industries – particularly in Australia, the US and the UK – as local, state and federal governments invest in infrastructure activities to try and spur economic recoveries following the pandemic.

What happened to the Pointerra share price after the update?

After sliding lower over the first half of the week, the Pointerra share price surged almost 30% higher after the report’s release on Thursday. Pointerra shares jumped a further 10% on Friday, meaning they were up almost 27% for the full week and edging back towards their 52-week high of $0.925. Year-to-date, Pointerra shares have now gained more than 40%.

Pointerra shares have so far easily outperformed those of the company’s closest competitor on the market, Nearmap Ltd (ASX: NEA).

Despite surging as high as $2.77 in mid-February, overall Nearmap shares have slumped this year, falling almost 10% lower to $2.07.

It will be interesting to watch Nearmap over the next few months to see if it also benefits from the same post-COVID business tailwinds as Pointerra.

More reading

• 3 growing small cap ASX shares to watch
• Why Megaport, Pointerra, Regis Resources, & Zip are charging higher
• Here’s why the Pointerra (ASX:3DP) share price is rocketing 26% higher
• 3 exciting small cap ASX shares to watch
• 2 exciting mid cap ASX shares with long runways for growth

Rhys Brock owns shares of Pointerra Limited and Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointerra Limited. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia has recommended Pointerra 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 Woolworths Group Ltd (ASX: WOW) share price could be on the move this week when it releases its third quarter update.

Ahead of the release, I thought I would take a look to see what the market was expecting from the retail conglomerate.

What is expected from Woolworths in the third quarter?

As I mentioned here earlier today, analysts at Goldman Sachs note that the supermarket industry is entering an “interesting phase”.

This is because it is now cycling through the COVID-19 pantry stocking boom from the height of the pandemic.

Furthermore, the broker notes that National Australia Bank Ltd (ASX: NAB) retail sales data points to a sharp decline in supermarket sales during the month of March.

The banking giant “reported cashless retail sales in the Supermarket and grocery segment to have been down c. -14% in March,” Goldman explained.

What does this mean for Woolworths?

While the broker expects Woolworths to have outperformed rival Coles Group Ltd (ASX: COL), it is still forecasting a decline in sales.

Goldman expects Woolworths to report revenues of $16.3 billion for the third quarter, down 1% on the prior corresponding period.

This will be driven by a 1% decline in comparable store Australian food sales, a 2.5% decline in comparable New Zealand food sales, a 2% increase in comparable liquor sales, and a 10% jump in BigW comparable store sales.

Is the Woolworths share price in the buy zone?

According to the note, Goldman Sachs remains positive on the retail giant and has retained its buy rating and $43.60 price target on its shares.

It commented: “While sales are expected to be volatile, we continue to believe that industry profitability will be manageable over CY21 and believe the current market concerns over a price war in the sector are overstated.”

More reading

• 2 excellent ASX 200 blue chip shares rated highly
• Is the Woolworths (ASX:WOW) share price in the buy zone?
• ASX 200 down 0.4%: Afterpay delivers stellar Q3 growth, Rio Tinto Q1 update
• Woolworths (ASX:WOW) share price lower despite announcing $223m investment
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What to expect from the Woolworths (ASX:WOW) Q3 update appeared first on The Motley Fool Australia.

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The NIB Holdings Limited (ASX: NHF) share price will be on watch this morning. This comes after the company provided investors with a trading update as well as a full-year outlook.

At last week’s market wrap, the private health insurer’s shares finished at $5.39.

How did NIB perform?

NIB shares could be on the move today as investors weigh up the company’s latest trading performance and outlook.

For the 9 months ending 31 March 2021, NIB reported that its business was “performing well” despite the ongoing uncertainty surrounding the COVID-19 pandemic.

The company’s core Australian Residents Health Insurance (arhi) business saw an increase in policyholders, recording a total of 641,804, up 3.7% compared to FY20. NIB stated that claims experience, especially risk equalisation, is lower than originally expected.

Consequently, unaudited group underlying operating profit (UOP) for the period is sitting at $140.9 million.

The company’s provision for deferred and suspended claims during the pandemic (COVID-19 provision) for arhi came to $59 million. This compares to $70.7 million recorded for the first half of FY21. NIB noted that deferred healthcare treatments during COVID lockdown periods appears to be slower for Q3 than during the first half of FY21. The group stated that forecasting claims experience remains challenging in the current environment.

Nonetheless, according to NIB, its strong arhi performance coupled with the stable trading conditions in New Zealand is offsetting its weaker performing segments. These include the company’s international inbound health insurance (iihi) and travel insurance businesses.

NIB is focusing on diverting its investment to a number of projects. It hopes that providing improved health services to members and travellers will lead to continued growth.

The NIB share price will be in focus today after the company advised it is forecasting group UOP to increase to between $200 million and $225 million. In the first half of FY21, the company achieved a UOP of $86.9 million.

NIB revealed it will present its FY21 results to the ASX on 23 August 2021.

About the NIB share price

Over the last 12 months, the NIB share price has gained around 12% but has fallen close to 11% year to date. The company’s shares reached a 52-week high of $6.16 at the start of this year, before slightly pulling back.

On valuation metrics, NIB commands a market capitalisation of roughly $2.4 billion, with 457.7 million shares on issue.

More reading

• Why the Ioneer (ASX:INR) share price is on watch today
• 2 bountiful ASX dividend shares rated as buys by brokers
• Netflix doubled profits, but it can’t keep paying this price
• The ASX share to go gangbusters as COVID vaccines roll out
• ASX share to cash in on US housing boom

Motley Fool contributor Aaron Teboneras owns shares of NIB Holdings Limited. The Motley Fool Australia has recommended NIB Holdings 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 Ioneer Ltd (ASX: INR) share price is one to watch this morning after a pre-market update from the Aussie miner.

Why is the Ioneer share price on watch?

Shares in the Aussie mining group are worth watching after its latest quarterly update. That included a cash flow and activities update for the period ended 31 March 2021 (Q3 2021).

Ioneer reported “solid progress” in its cornerstone Rhylite Ridge Project as it recorded a $1.31 million net operating cash flow loss. A number of US and European institutional investors backed an $80 million placement during the quarter. The Ioneer share price rocketed higher during the period despite tumbling after the 38 cents per share placement.

The proceeds from that capital raise provide the funding necessary to accelerate development of the Nevada-based project. Uses include advancing detailed engineering, environmental, research and consulting expenses as well as working capital and general purposes.

Ioneer reported the successful production of battery-grade lithium hydroxide from the pilot plant feedstock. That’s a significant milestone in delivering a higher premium product to boost sales.

Discussions for various offtake agreements are “progressing well” with a first lithium offtake announcement expected in the June quarter.

The Ioneer share price has had a strong start to the year with solid gains in the first quarter. Shares in the Aussie lithium-boron mining group are up by around 30% as at Friday’s close to 36.5 cents per share.

Ioneer is waiting on a Notice of Intent (NOI) from the US Bureau of Land Management (BLM) to pave the way for construction commencement. That’s currently expected to occur during the fourth quarter once the final Record of Decision (ROD) is received.

The company also signed a memorandum of understanding (MOU) with Caterpillar Inc. during the quarter. That MOU came after the completion of an autonomous haul truck feasibility study at the site.

Two new non-executive directors were appointed during the period with both Rose McKinney-James and Margaret R. Walker based in the US.

Foolish takeaway

The Ioneer share price is one to watch this morning after the company’s latest quarterly update. Shares in the Aussie-US miner have been on fire to start the year, climbing 30.4% in 2021.

More reading

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• Netflix doubled profits, but it can’t keep paying this price
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• ASX share to cash in on US housing boom
• AGL Energy (ASX:AGL) share price hits 52-week low

Motley Fool contributor Ken Hall 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.

The post Why the Ioneer (ASX:INR) share price is on watch today appeared first on The Motley Fool Australia.

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There are a handful of ASX dividend shares that have been rated as buys by dividends. These businesses offer bountiful payouts and could pay even bigger payments in FY21.

Stocks with good yields are in higher demand at the moment because of how low official interest rates are right now.

Brokers have picked out these two ASX shares as ideas:

Waypoint REIT Ltd (ASX: WPR)

Waypoint is Australia’s largest real estate investment trust (REIT) that is a pure play on fuel and convenience retail real estate.

It’s currently rated as a buy by the broker Morgans, it has a price target on the ASX dividend share of $2.94.

Morgans liked how Waypoint REIT’s income kept flowing from tenants in FY20 despite all of the COVID-19 impacts. In FY20 Waypoint was able to grow its distributable earnings per security (EPS) by 4.25% to 15.15 cents.

In FY21, the REIT is expecting to grow its distributable EPS by 3.75% to 15.72 cents. The expected FY21 growth is primarily underpinned by fixed 3% rent increases across the majority of the portfolio. That includes the sale of $20 million to $30 million of non-core assets, but assumes no acquisitions.

At 31 December 2020, its net tangible assets (NTA) per security was $2.49 – an increase of 8.7% over the prior corresponding period. The current share price is trading at around that NTA.

In FY21, Morgans is expecting Waypoint REIT to pay a distribution of 15.7 cents per security, translating to a distribution yield of 6.3%.

Inghams Group Ltd (ASX: ING)

Inghams is one of the largest poultry businesses in Australia and New Zealand. It has national networks of processing and distribution facilities.

The board of Inghams recently decided to change its dividend payout ratio policy to be in a range of 60% to 80% of underlying net profit after tax (NPAT). That means that it might be more attractive for dividend investors.

In the ASX dividend share’s FY21 half-year result, poultry volume growth was 4%, with total revenue growth of 4.6% and total poultry revenue growth of 6.1%.

Underlying net profit after tax (NPAT) before AASB16 changes grew 10.7% to $46.5 million. The interim dividend was increased by 2.7% to 7.5 cents. Growth of profit allows for the sustainable growth of the dividend.

In terms of the company’s outlook, it said that it will continue to focus on the execution of its five-year strategy to deliver more consistent, predictable and reliable returns to shareholders.

Inghams said the net impact of lower feed prices is expected to be modest in the second half, given the recent surge in international demand and customer cost pass through mechanisms.

The broker Citi rates Inghams as a buy, though it pointed to the Woolworths Group Ltd (ASX: WOW) contract negotiation as a potential headwind. The price target is $4.40 and it expects Inghams to pay a grossed-up dividend yield of 6.2% in FY21.

More reading

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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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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.

If you follow Netflix Inc (NASDAQ: NFLX) you likely already know the company missed expected subscriber growth projections when it reported its latest earnings. Specifically, the streaming giant’s net addition of a little less than 4 million paying customers fell short of forecasts for 6.25 million new members. Some see this news as a sign that the pandemic-prompted swell of streaming sign-ups is all but over.

Largely lost in the noise of a membership shortfall, however, is that Netflix more than doubled its year-over-year profits. The first quarter’s bottom line of $1.7 billion is a 140% improvement on net income of $700 million earned during the first quarter of 2020.

So what’s the problem? The reason profits grew so dramatically appears to be the same reason subscriber growth was so poor. If this dynamic represents the new normal, it’s a hint that Netflix may have to choose strong profits or strong customer growth because it can’t have both.

Customers don’t just show up

For the majority of its existence, Netflix has faced no serious competition. Walt Disney Co (NYSE: DIS) only launched Disney+ in late 2019, and HBO Max from AT&T Inc (NYSE: T) wasn’t available until the middle of last year. Disney’s Hulu and Fox Corp.‘s ad-supported platform Tubi have been around longer, but have only become contenders within the past couple of years. And that’s just a sampling of new (or newly budding) streaming names.

Netflix hasn’t responded in earnest, however, opting to play more defense against the pandemic than it’s played offense against streaming newcomers. Namely, marketing spending has dwindled — a lot — since early 2020 rather than growing in step with revenue. Last quarter’s marketing outlay of $512 million was barely better than the year-ago figure of $504 million, and that $504 million was the second-lowest amount Netflix had spent on marketing in any quarter since the final quarter of 2017.

One can’t say with certainty the cause-and-effect relationship in play here is an absolute one. The company’s subscriber additions are being held up to tough comps, after all. In the first quarter of last year, Netflix picked up nearly 16 million new subscribers, and it added another 10 million in the second quarter of 2020. It’s arguable that anyone who wanted to subscribe to Netflix is already on board.

But there’s growing evidence that consumers are simply more responsive to other on-demand options despite Netflix’s dominance of the market.

Research outfit Kantar delivered the latest salvo in this argument, estimating HBO Max picked up more of last quarter’s new US streaming business than any other platform: 14.4% of new customers. Prime, from Amazon, won second place in terms of streaming subscriber additions. ViacomCBS‘s Paramount+ (formerly known as CBS All-Access) came in third with its 11.8% share last quarter, followed by Disney’s Disney+ and then its Hulu. Netflix was sixth-best in terms of new US customer growth, winning only 8.5% of the nation’s new on-demand business.

In a similar vein, Ampere Analysis suggests Netflix’s share of the US market fell from 29% to 20%.

This doesn’t necessarily point to subscriber losses. It does, however, make it clear that at least some new streaming customers are choosing a rival’s platform over Netflix.

Content spending was way down too

It’s not just cost-cutting on marketing that may ultimately be undermining Netflix’s dominance, either. The company spent relatively less on content, too, during Q1. The first quarter’s $3.9 billion cost of revenue (what it spent on content) is only 7% more than the year-ago figure even though revenue grew by an incredible 24%. The graphic below puts things in perspective. 

On the surface, it may seem irrelevant. The streaming giant still has a huge library of stuff to watch, after all.

It’s not that simple though. Not only does Netflix need more kinds of content to keep its now-bigger audience entertained, it needs more new content to do so. CFO Spence Neumann explained during a post-earnings conference call, “We also have a near-global shutdown in production which we’ve been ramping safely and at scale through much of last year and into this year, but it did push some key title launches into the back — kind of the back end of — of this year,” which he conceded “does create some noise” in terms of subscriber growth.

To this end, the company’s already assured investors it’s going to ramp content spending back up to $17 billion this year, a jump from 2019’s budget of $15 billion and on par with 2020’s pre-pandemic content budget of $17 billion.

In so doing though, last quarter’s gross margin of 46% is apt to be whittled back to a historical norm closer to 38%. This will dial back Q1’s operating income rate of near 27% of revenue to the company’s historical net operating profit margin in the high teens. In terms of dollars, these more normalized margin rates would have meant net operating income closer to $1.2 billion last quarter (or less) rather than the $1.7 billion worth of net operating income Netflix actually posted.

The bottom line

It’s possible that the first quarter’s weak subscriber growth is just the result of bad timing.

Possible, but unlikely. Other streaming services are adding more paying members with what appear to be more aggressive ad campaigns and — in some cases — more aggressive spending on content. For instance, AT&T’s WarnerMedia was willing to undermine box office ticket sales of its new $155 million flick Godzilla vs. Kong by offering it at no additional cost via HBO Max. Kantar says it picked up more new streaming subscribers in Q1 as a result.

Rather, Netflix may mostly be struggling with subscriber growth simply because it’s spending too little on the effort.

If that is indeed the case, don’t look for last quarter’s (or even last year’s) profit growth and profit-versus-expense profile to become the new norm. It’s the exception to the norm. Netflix has already told us it’s going to be spending more on content, but don’t be surprised if the company again ramps up marketing spending. That’s certainly what it should do anyway, given how competitive the streaming market has become in just the past year.

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

More reading

• Broker weighs in on the Redbubble (ASX:RBL) share price after its 20% dive
• Are Netflix’s woes a warning for ASX tech shares?
• Analyst sees Netflix falling 38% after earnings
• Netflix misses sub addition target, shares crash
• Earnings: 2 hot stocks to watch this week

James Brumley owns shares of AT&T. 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 recommends Amazon, Netflix, and Walt Disney and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Netflix doubled profits, but it can’t keep paying this price appeared first on The Motley Fool Australia.

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

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The COVID-19 pandemic might have pushed more Australians into the habit of shopping online, but there’s still one physical retailer that’s looking great for growth.

That’s according to Wilson Asset Management portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg.

In a memo to investors, the trio co-wrote that 3 of Wilson’s listed investment companies have held Universal Store Holdings Ltd (ASX: UNI) shares since their initial public offering (IPO) last November.

“Universal Store retails a curated range of third-party branded products, which equated [to] approximately 70% of FY20 revenue, supported by a range of customer-led and complementary private label products,” the note said.

“The company reported a record 6 months in its FY21 maiden interim result, with underlying earnings before interest and tax growing 69% to $31.5 million, surpassing guidance given in January 2021 of $30 million to $31 million.”

The retailer runs 65 casual clothing stores across Australia and New Zealand. The chain specifically targets the 16 to 35-year-old age bracket.

Universal shares were flat on Friday, closing at the same price as Thursday on $7.11. They started the year at $5.51.

Universal will soar as the COVID-19 vaccine rolls out

The Wilson portfolio managers said they had reduced exposure to e-commerce companies that benefitted last year from pandemic-led consumer habits.

But Universal is still held and remains a favourite.

“We believe retailers leveraged to increasing foot traffic through shopping centres will benefit as the vaccine [rolls out] nationally,” the Wilson memo read.

“We are positive on the outlook for growth, as the company has a net cash balance sheet of $22.5 million, with strong opportunities for store network growth and a product range expected to benefit from the return of occasions and triggers for wardrobe renewal as Australia moves toward post-coronavirus normal.”

Wilson’s flagship investment vehicle WAM Capital Limited (ASX: WAM), as well as WAM Research Limited (ASX: WAX) and WAM Microcap Ltd (ASX: WMI), have been shareholders since Universal’s float 5 months ago.

Universal sold for $3.80 during its IPO, so it has already returned 87% for those funds.

Last week, Morgans also rated the retailer’s stock as a buy, slapping a price target of $8.37 on it. That would be another tidy 18% return on the current price.

More reading

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Motley Fool contributor Tony Yoo owns shares of WAM Capital Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The US housing market is about to explode, and there is one ASX share that will give Australian investors exposure.

That’s according to Firetrail Investments portfolio manager Ramoun Lazar, who said that last year’s government and Federal Reserve COVID-19 stimuli lit a fire under the real estate market.

“That really got their housing market started and [gained] some significant momentum through the second half of the calendar year,” he said in a Firetrail video.

“That momentum was being driven by millennials coming back into the market — so first-home buyers… People in their mid-20s to around 40 years of age who haven’t been active in that US housing market for some time.”

If the record-low mortgage interest rates can stick around, that momentum will continue over the next 12 to 24 months, according to Lazar.

The pandemic in the US also compelled existing homeowners to spend up.

“What we saw in the US was an initial uptick in do it yourself activity. So people were just doing small repair jobs around the home, making their homes more presentable, more livable.”

40 years: average age of an American house

Lazar pointed out that the typical US residential home is about 40 years old.

“So quite an old footprint for the US housing stock. As that millennial cohort start to buy houses, get married, have a family, what we’re going to see is an increased level of repair and remodel activity,” he said.

“And that’s going to underpin spend in that renovation sector of the market or segment of the market.”

There will also be a driver for new houses.

“We estimate the US needs about 1.5 million new homes every year, just to stand still,” said Lazar.

“Over the last 10 years, we’ve seen housing starts materially below that one and a half million… The reason for that is after the 2008 housing-led financial crisis, that millennial cohort was very slow in embracing homeownership.”

But now that the government and federal reserve stimulus is in people’s pockets, construction activity will ramp up.

ASX share that doubles its addressable market

Remarkably, there is an ASX share that’s perfectly placed to take advantage of this housing frenzy in the US.

Construction materials maker James Hardie Industries plc (ASX: JHX) is ready to double its total addressable market, according to Lazar.

“The real exciting factor we think over the next 2, 3, 5 years for James Hardie is the new product portfolio that they’re about to introduce into that US housing market,” he said.

“Traditionally, James Hardie has targeted that wood look market… but it’s about to release a portfolio of products in the US that will target other segments of the market, such as brick and stucco. Stucco’s known [in Australia] as cement render, which is a very popular exterior siding product in the US.”

If James Hardie’s execution takes proper advantage of the real estate boom, the world is their oyster.

“We think there are significant earnings and valuation upside potential in James Hardie from that new product portfolio.”

Lazar was also excited that James Hardie’s margins in the US seem to be growing.

“We’ve several periods now of margin expansion in their North American business, and we think that’s going to continue. And what that’s been driven by is a lot of self-help initiatives around manufacturing,” he said.

“What that’s underpinned is margins growing close to 30% in the last couple of quarters. Historically Hardies targets between 20% to 25% margin. We think that uplift is sustainable.”

The James Hardie share price was up 0.91% on Friday, to trade at $44.34 at market close. It started this year at $38.74.

More reading

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• BlueScope (ASX: BSL) share price could get cut of Biden’s US$3tn boost

Motley Fool contributor Tony Yoo 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 AGL Energy Limited (ASX: AGL) share price has been under pressure lately. Shares in the Aussie energy group fell 1.0% lower on Friday to close at $8.71 per share.

That’s a new 52-week low for the electricity generator and retailer or ‘gentailer’, so what does May 2021 look like from here?

Why the AGL Energy share price is at a 52-week low

April was a busy month for the Aussie energy company. AGL announced on 30 March that it intended to create a demerger of sorts to create “two leading energy businesses”.

That plan was unveiled by AGL managing director and CEO, Brett Redman. Mr Redman said there will be a structural separation of the existing group into:

• “New AGL”, Australia’s largest multi-product energy retailer focused on low carbon; and
• “PrimeCo”, Australia’s largest electricity generator.

The proposed structural separation was designed to give each business more freedom and further drill down into key areas of the Aussie electricity market.

That was all well and good, but the plan has changed. Mr Redman abruptly announced his resignation on 22 April and caused a rapid reshuffle at AGL during the month.

AGL chair Graeme Hunt will become interim CEO and managing director, while non-executive director Peter Botten has been appointed chair.

News of the leadership change saw the AGL share price fall lower in April. The announcement took many in the market by surprise given Mr Redman’s short tenure and structural plans. The Aussie energy company has commenced a search for its next CEO willing to commit to the transition phase.

What else is happening for AGL?

Leadership changes weren’t the only thing moving the AGL share price in April. AGL announced that its joint venture with Mercury NZ Ltd (ASX: MCY), Powering Australian Renewables (PowerAR), had increased its offer price to acquire Tilt Renewables Ltd (ASX: TLT).

The revised NZ$8.10 per share or NZ$3.07 billion offer came after Canadian pension fund CDPQ had lobbed a late competing offer for the Kiwi renewables group. That was ultimately enough to clinch the deal for Tilt over and above CDPQ.

There have also been concerns about testing domestic electricity and gas supply and demand issues. Market commentators and regulators continue to watch the market to ensure ongoing electricity security, particularly in the retail market.

Foolish takeaway

The AGL share price has been under pressure in April. Shares in the Aussie energy company are sitting at a 52-week low prior to Monday’s open as the latest CEO departure makes investors wary.

More reading

• What’s been happening with ASX renewable energy shares lately?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• AGL (ASX:AGL) share price at 17-year low, dividend hits 9.2%
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Motley Fool contributor Ken Hall 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 Coles Group Ltd (ASX: COL) share price will be one to watch this week when it releases its third quarter update.

Ahead of the release, I thought I would take a look to see what is expected from the supermarket giant.

What is the market expecting from Coles?

According to a note out of Goldman Sachs, its analysts note that the supermarket industry is entering an “interesting phase”. This is due to it cycling through the COVID-19 pantry stocking boom late in the third quarter of FY 2020.

In fact, according to the Australian Bureau of Statistics, supermarket and grocery sales grew 24.8% in March 2020. As a result, Goldman expects both Coles and rival Woolworths Group Ltd (ASX: WOW) to have seen comparable sales decline notably during March. Particularly given recent data out of National Australia Bank Ltd (ASX: NAB).

The broker commented: “NAB reported cashless retail sales in the Supermarket and grocery segment to have been down c. -14% in March 2020. By comparison, our comparable growth estimate for COL implies March 2021 trading at -14.5% assuming that the early quarter trends continued into end of Feb 2021. Similarly, for WOW our estimates imply a comparable sales decline of c. -13% for March 2021.”

What does Goldman expect Coles to report?

Goldman expects Coles to report a 3% decline in comparable food sales for the quarter but a 2% increase in liquor sales.

This is expected to lead to total sales of $9,039.6 million, comprising food sales of $7,960.4 million and liquor sales of $802.5 million.

Is the Coles share price in the buy zone?

Despite the softer trading, Goldman Sachs remains positive and believes the Coles share price is in the buy zone.

It commented: “While sales are expected to be volatile, we continue to believe that industry profitability will be manageable over CY21 and believe the current market concerns over a price war in the sector are overstated.”

Goldman has therefore retained its buy rating and $20.70 price target on its shares. Based on the current Coles share price, this represents potential upside of almost 32%.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET 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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