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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.

NVIDIA‘s (NASDAQ: NVDA) gaming business has been on fire in recent quarters, and it looks like the segment’s terrific growth is here to stay for the long run. At least that was the indication according to insights from the company’s recent Investor Day presentation.

The graphics specialist is coming off an outstanding year, with revenue jumping 53% in fiscal 2021 to $16.7 billion and diluted earnings rising 73% year over year to $10 per share. And NVIDIA’s guidance for the ongoing quarter indicates that things are about to get even better for the chipmaker. The company originally expected revenue to spike 72% year over year to $5.3 billion in Q1, but it recently said that actual revenue is tracking above that outlook.

NVIDIA investors may want to get used to such eye-popping jumps, as the company’s main growth driver — gaming — is at the beginning of a multi-year growth curve. Let’s see why.

NVIDIA’s biggest business is on a red hot growth streak

The gaming business is NVIDIA’s biggest source of revenue. It produced 50% of the company’s total revenue last quarter, and it recorded 67% year-over-year growth, driven by huge demand for the RTX 30-series cards. It is also worth noting that NVIDIA closed the fiscal year with record gaming revenue of $7.76 billion, a 41% annual increase that outpaced the segment’s five-year compound annual growth rate (CAGR) of 21%.

NVIDIA CFO Colette Kress remarked on the last earnings conference call: “Demand is incredible for our new GeForce RTX 30 Series products based on the NVIDIA Ampere GPU architecture.” She also added that the RTX 30 series cards have been “hard to keep in stock and we exited Q4 with channel inventories even lower than when we started.”

In fact, NVIDIA expects demand to exceed supply for “much of this year,” even though the company says it will have enough stock to support sequential growth for future quarters. It is not surprising to see why such a scenario is unfolding.

NVIDIA estimates that 85% of its installed base of consumer graphics cards needs to be upgraded to the RTX series. That’s because the company’s RTX 30-series cards, based on the Ampere architecture, deliver a huge jump in performance over the older GTX-series cards and Turing-based RTX-series cards. The RTX 30 cards also offer ray-tracing capabilities — a feature that’s becoming an integral part of games nowadays.

NVIDIA says that a mid-range card like the RTX 3060 can deliver more than thrice the performance of a card like the GTX 1660 Super when ray-tracing is turned on. It is worth noting that the RTX 3060 has been launched at a suggested price of $329, compared to the $229 launch price of the GTX 1660 Super. As such, consumers are getting a 3X performance increase for a 40% bump in price.

The favorable price-to-performance ratio of the RTX 30 cards explains why these cards are in huge demand. For instance, NVIDIA launched the RTX 3080 at $699. The card is twice as fast as its predecessor — the RTX 2080 — which had a retail price of $799 at launch. The value proposition offered by the new cards is encouraging NVIDIA consumers, who are willing to pay more money for the bigger performance increase, to upgrade at a faster pace.

Faster upgrades, improved pricing power mean consistent gaming growth

NVIDIA says that its Ampere GPU (graphics processing unit) architecture is ramping up at twice the pace of its predecessors, the Turing and Pascal cards. This is also evident from the fact that the Ampere cards now enjoy two times the share of the preceding Turing cards on popular gaming platform Steam, which boasts 120 million monthly active users. That’s impressive considering that the Ampere-based RTX 30 graphics cards were just unveiled in September 2020.

What’s more, the attractive price-to-performance ratio of the Ampere cards is encouraging consumers to pay more money for a much-improved performance compared to the earlier generation cards. NVIDIA says that the Ampere cards are commanding an average selling price of $360 in the initial months after their launch. That’s a 20% increase over Turing’s average selling price of $300 for the first six months after launch, thanks in part to improved sales of higher-priced cards.

With a huge proportion of NVIDIA’s installed base having yet to upgrade to the new cards, investors can expect the chipmaker to enjoy a combination of higher volumes and improved pricing for a long time to come. This should help the gaming business record consistently high growth levels, boost NVIDIA’s overall revenue and earnings, and help it remain a top growth stock for a long time to come.

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

More reading

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• 2 ASX dividend shares to buy with yields above 4%

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

The post A red-hot reason why NVIDIA’s blockbuster growth is here to stay 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 Helloworld Travel Ltd (ASX: HLO) share price is in negative territory today following the release of a trading update. During mid-morning trade, the travel booking company’s shares are fetching for $2.03, down 1.9%.

Q3 FY21 Trading update

Helloworld shares are backtracking today as investors digest the company’s latest financial results.

For the quarter ending 31 March 2021, Helloworld reported an ongoing recovery of its key operational metrics.

Total Transaction Value (TTV) stood at $261.5 million. This reflected an increase on the two previous quarters, but still a long way off from Q3 FY20 – down 79.6%. Helloworld stated that January and February lockdowns impacted TTV performance. Notably, the month of March recorded the highest TTV for the financial year, at $112.5 million.

Revenue for the March quarter totalled $15 million. This is similar to what was achieved in Q1 and Q2 of FY21, $13.1 million and $16.5 million, respectively. Compared to the corresponding period, however, revenue declined 75.8%.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) also came at a loss of $4.4 million for Q3 FY21. This is in line with Helloworld’s previous forecasts announced to shareholders earlier in the year. Year-to-date EBITDA is currently running at a loss of $10.9 million.

The company declared a healthy cash balance of $125.9 million, with total free cash of $75 million. External borrowings totalled $81 million with available headroom on its debt facilities of $30.2 million.

Outlook

With the easing of restrictions and state borders open in Australia, Helloworld is expecting TTV to continue to improve. In addition, the opening of the trans-Tasman bubble could provide a boost in retail, corporate, ticketing and wholesale business divisions.

Provided there are no significant COVID-19 impacts, Helloworld is projecting to reach annualised TTV of $1 billion in 2021. Underlying EBITA is expected to incur a loss of around $14 million to $16 million for FY21.

About the Helloworld share price

Over the last 12 months, the Helloworld share price has gone on a rollercoaster ride. The company’s shares are up over 50% from this time last year, but down almost 20% year-to-date.

On valuation metrics, Helloworld has a market capitalisation of roughly $314 million, with 155 million shares on issue.

More reading

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Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited. The Motley Fool Australia has recommended Helloworld 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 Atlas Arteria Group (ASX: ALX) share price is down today after the toll road company shared its quarterly traffic and revenue update. The company has built and now operates toll roads in Germany, France and the US.

The Atlas Arteria share price is currently trading at $5.92, down from yesterday’s closing price of $5.97.

Let’s take a closer look at today’s news from Atlas Arteria.

Lockdowns = traffic down = revenue down

The company’s report for the quarter ending 31 March 2021 showed a decrease in the number of cars using the company’s toll roads.

On average, the number of cars using Atlas Arteria’s tollways decreased by 12.4% this quarter compared to the first quarter of last year.

Atlas Arteria advised this was because of ongoing COVID-19 related lockdowns in Europe and the United States during the quarter. It claimed that, while COVID-19 lockdowns impacted the prior corresponding period, it was for only 1 month during an otherwise strong quarterly performance.

Performance in France

Atlas Arteria essentially has a stake of around 31% in both the APRR tollway and the ADELAC tollway through different investments.

While the APRR tollway experienced a 12.8% drop in the number of vehicles using it, its revenue wasn’t so hard hit. Due to an increase in the number of heavy vehicles using the tollway, Atlas Arteria’s income from APRR was only 6% less than the first quarter of last year. It brought in around EU€515.5 million this quarter.

The ADELAC wasn’t so fortunate. Border restrictions meant the freeway’s bread and butter – commuters from Switzerland were unable to cross into France. The number of travellers using the freeway dropped by 25.3%, while its revenue dropped 25.7%. Income for the quarter was around EU€8.9 million.

Germany

Atlas Arteria owns the Warnow Tunnel in Germany. Germany spent the entire quarter in a strict lockdown. As a result, the number of travellers using the Warnow Tunnel was the lowest it’s been since the pandemic began.

18.7% fewer vehicles passed through the Warnow Tunnel compared to the first quarter of last year, which was minimally impacted by COVID-19 restrictions. Compared to the previous corresponding quarter, Atlas Arteria’s income from the tunnel was also down by 17.2%, raking in around EU€2.4 million.

The United States

In the US, Atlas Arteria owns the Dulles Greenway in Virginia. According to the company’s release, Virginian’s preference to work from home, government-imposed lockdowns and heavy snowfall all added to a decrease in vehicles using the freeway.

Traffic on the Dulles Freeway was the hardest hit out of all the company’s tollways. It was down 36.4% compared to the previous corresponding quarter and 46.5% lower than the first quarter of 2019. Revenue from the freeway was also down by 37% this quarter. It only brought in around US$11 million in the first quarter of 2021. That’s compared to around US$20 million in that of 2019.

Atlas Arteria share price snapshot

The Atlas Arteria share price is having a bad run on the ASX lately.

Currently, the Atlas Arteria share price is down 8% year to date, although it’s up by 7% over the last 12 months.

The company has a market capitalisation of around $5.7 billion, with approximately 959 million shares outstanding.

More reading

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• What is pushing up the Atlas Arteria (ASX:ALX) share price today?

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 Afterpay Ltd (ASX: APT) share price finished flat on Monday despite posting another set of strong quarterly results. At the time of writing, the Afterpay share price is trading at $122.52, down 2.16%. 

The company recorded classic triple-digit growth with group March quarterly sales up 104% on the prior corresponding period. The leading buy now pay later’s (BNPL) active customers increased 75% to 14.6 million, up from 8.4 million a year ago. Key highlights for the quarter include its first sales from Europe and a potential US listing. 

Here are the updates from big brokers after digesting Afterpay’s results. 

Credit Suisse remains bullish on the Afterpay share price

Underlying sales came in slightly ahead of Credit Suisse’s expectations. However, seemingly strong customer growth figures came in slightly weaker than what the broker was expecting.

The broker lowered its estimates for underlying sales by 2% for FY21 and 1% for FY22 to FY25. The lower sales forecasts translate to a larger loss forecast in FY21 and a slightly lower profit for the other years. 

Despite lower forecasts, the broker retained its outperform rating with a $145 target price. 

Morgans retained its hold rating 

Lower sales growth forecasts appear to be a consistent theme in broker updates for Afterpay.

Morgans lowered the company’s FY21 earnings per share forecasts by 7% and FY22 by 8% on lower sales growth assumptions.

As a result, the broker lowered its target price from $125.3 to $121 with a hold rating. 

UBS is permanently bearish on Afterpay 

UBS began coverage of the Afterpay share price back in mid-October 2019, and its been sell rated ever since. 

Today’s UBS note comes as no surprise with the broker retaining its sell rating with a $36 target price. 

The broker observes that Afterpay’s update was mixed against its expectations and has followed the trend in lowering forecast sales. 

Foolish Takeaway

The Afterpay share price has opened 2% lower to $122.20 on Wednesday following a sharp selloff in US markets overnight. Brokers are in a tug of war with views that Afterpay shares will go higher, flat, and lower. 

While target prices may vary, there appears to be a consistent theme of lower forecast sales. This ultimately reminds me of Macquarie’s in-depth report on how the Afterpay share price will perform in the short to medium term. 

More reading

• Vulcan Energy (ASX:VUL) share price slumps amid asset spin-off
• BHP (ASX:BHP) share price drops despite 10-year iron ore highs
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• Westpac, ANZ, CBA share prices dip after class action for ‘junk’ insurance
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Motley Fool contributor Kerry Sun 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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Vulcan Energy Resources Ltd (ASX: VUL) shares are in the red today after the company announced a planned spin-off and initial public offering (IPO) of its non-core, Scandinavian assets. At the time of writing, the Vulcan share price is slumping 2.01% to $7.30. For context, the All Ordinaries Index (ASX: XAO) is sliding 0.8% in morning trade.

Let’s take a closer look at what the lithium producer announced.

What’s impacting the Vulcan share price? 

The Vulcan share price is losing ground today after the company advised it has decided to spin-off and IPO its non-core, Scandinavian battery metals projects (non-lithium). This will create a new, zero-carbon copper, nickel and cobalt company named Kuniko Limited. 

According to the company, by separating its non-lithium assets, the ‘new’ Vulcan can fully focus on the development of its flagship Zero Carbon Lithium project in Germany. 

Kuniko will retain Vulcan’s signature zero-carbon theme throughout exploration, development and production. It will focus on zero-carbon projects, hydroelectric power, and the development of mineral processing flowsheets for production using zero fossil fuels.

Kuniko currently retains a 262 sq km portfolio that consists of five key nickel, cobalt and copper exploration projects in Norway. The company highlights its proximity to the faster-growing battery market as a key advantage. This includes key electric vehicle players such as Tesla‘s Brandenburg facility. 

These three commodities have benefitted from higher prices in recent months driven by strong industrial demand in China and the electric vehicle sector. This has resulted in a surge in the value of Vulcan shares over the past year.

Nickel prices have staged a multi-year rally that began in March last year. The commodity is experiencing growing demand for use in lithium-ion batteries alongside its use in stainless steel and other alloys. 

Cobalt has experienced a similar boom-to-bust cycle as lithium. The metal surged from around US$30,000/tonne in late 2016 to over US$90,000/tonne by early 2018 before falling back down to around US$30,000/tonne by July 2019. Cobalt prices have since bounced back near US$50,000/tonne due to robust demand in rechargeable batteries and energy storage. 

Copper has taken off to a decade high of around US$9,400/tonne thanks to China’s significant investment in infrastructure and President Biden’s multi-trillion dollar infrastructure plan. 

How will this impact Vulcan shareholders? 

According to the company, Vulcan shareholders will “benefit from a 1 for 4 priority offer to raise funds at 20 cents per share in Kuniko”. Existing shareholders will also receive “priority rights to apply for additional shares above their entitlement”. 

Following the spin-off and IPO, Vulcan intends to retain ownership of around 27% of Kuniko. Vulcan advised it intends to maintain the stake due to the synergies the two companies share across their focus on zero-carbon battery metals and the targeting of European markets. 

Foolish takeaway

The Vulcan share price has rallied by a whopping 3,370% over the past 12 months. Vulcan shares are also up by around 160% year to date. The company has a current market capitalisation of around $800 million.

More reading

• Why this broker thinks the Vulcan (ASX: VUL) share price can double again
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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 recommends 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.

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The BHP Group Ltd (ASX: BHP) share price is falling this morning after the global resource giant released its third-quarter update.

At the time of writing, the BHP share price is trading 1.63% lower to $46.68.

Why is the BHP share price falling lower?

Investors have been selling the miner’s share this morning after the company posted its quarterly activities report for the period ended 31 March 2021.

According to the announcement, BHP achieved record production at Western Australia Iron Ore (WAIO). Additionally, the company accomplished record average concentrator throughput at its Escondida copper mine.

Following the quarter’s performance, production guidance for FY21 remains unchanged for petroleum and iron ore. However, guidance for the company’s copper production has increased to between 1,535 kt to 1,660 kt. This reflects the strong performance from Escondida.

On the metallurgical coal front, BHP has reduced its guidance to between 39 Mt and 41 Mt due to poor weather conditions. The lower expected coal volumes have also increased expected unit costs for Queensland Coal to US$74 and US$78 per tonne.

Iron ore prices hit a 10-year high

The BHP share price appears unfazed by the continued iron ore price momentum. The steelmaking commodity hit 10-year highs in the past 24 hours, as demand continues to outstrip supply.

Brazilian iron ore producer Vale fell short of expected production numbers last night, aiding in further upwards movement. The iron ore spot price lifted to US$189.61, setting the field for a potential US$200 per tonne price if the momentum continues.

BHP’s iron ore production for the last quarter came in at 66 Mt, which has also fallen short of the 67.2 Mt projected by Macquarie. The company’s production was impacted by various obstacles during the quarter, including weather and equipment maintenance.

Outlook for BHP

The company continues to invest in further projects. At the end of March 2021, BHP counted 4 major projects under development across petroleum, iron ore, and potash. These projects combined carry a combined budget of US$8.5 billion over the project’s life. All of the projects remain on track.

The US$3.06 billion South Flank iron ore project is on track to begin production by the middle of the year.

Meanwhile, BHP has been making an effort to find ways of reducing its greenhouse gas emissions. In February, the company committed US$15 million over a 5-year partnership with Japanese steel producer JFE to investigate potential options.

In addition, the company committed a further US$15 million over 3 years with China’s HBIS Group Co to explore GHG emissions reduction technology.

Despite the gain in iron ore prices, the BHP share price is not alone in today’s selloff. Rio Tinto Limited (ASX: RIO), Mineral Resources Limited (ASX: MIN), and Fortescue Metals Group Limited (ASX: FMG) are all trading lower. Consequently, the S&P/ASX 200 Index (ASX: XJO) is feeling the pressure, sliding 0.93% at the time of writing.

More reading

• 2 ASX dividend shares to buy with yields above 4%
• ASX lithium shares are soaring. Is it too late to jump onboard?
• The Renergen (ASX:RLT) share price is on watch today
• Why the Bega Cheese (ASX:BGA) share price is at a 52-week high
• Why the Commonwealth Bank (ASX:CBA) share price is flying right now

Motley Fool contributor Mitchell Lawler 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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There are some quality ASX dividend shares out there that have solid dividend yields.

Interest rates are very low at the moment, making it difficult to make any interest from having cash in the bank. The Reserve Bank of Australia (RBA) doesn’t expect to increase the official rate for at least a couple of years yet.

People that are focused on income can get a higher level of dividends from these two investments:

Centuria Industrial REIT (ASX: CIP)

This real estate investment trust (REIT) is Australia’s largest domestic pure play industrial REIT. It’s in the S&P/ASX 200 Index (ASX: XJO).

It’s currently rated as a buy by the broker Ord Minnett. The broker has a price target of $3.90 on the business.

The ASX dividend share has a portfolio of high-quality industrial properties that are located in city locations across Australia and it’s underpinned by a quality and diverse tenant base. The REIT has managed to achieve both capital growth and good income.

Centuria Industrial REIT recently completed external valuations of 56 of 61 of its investment properties – that’s 93% of the portfolio by value. It now has 72 properties.

On a like for like basis, the portfolio valuation increased by $192 million, or 8.1% from prior book values. The total portfolio weighted average capitalisation changed by 46 basis points from 5.42% to 4.96%. Centuria Industrial REIT’s net tangible assets (NTA) increased from $2.99 to $3.32 per unit.

The portfolio value increased partly because of leasing success. It has an occupancy rate of 97.7%, with a weighted average lease expiry (WALE) of 9.8 years.

The biggest recent valuation change was that the Telstra Corporation Ltd (ASX: TLS) data centre in Clayton, VIC, it increased in value by $28.3 million.

In FY21, it’s expecting to pay a distribution of 17 cents per unit, which is a yield of 4.8% at the current Centuria Industrial REIT share price.

Brickworks Limited (ASX: BKW)

Brickworks is an ASX dividend share with one of the longest records. It has maintained or grown its dividend every year for over four decades.

The business has a large array of building product divisions across Australia and North America. This includes brickmakers, masonry, roofing, precast and other specialised building systems.

But there are two other assets that fund the Brickworks dividend each year.

It owns around 40% of the investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Soul Patts owns a diversified portfolio of investments that provide defensive and reliable cashflow each year. Some investments include TPG Telecom Ltd (ASX: TPW), Brickworks itself, Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).

Soul Patts itself is an ASX dividend share with an impressive dividend record. It has increased the dividend every year for the last two decades.

The other part of Brickworks’ dividend funding is its 50% stake in a quality industrial property trust alongside Goodman Group (ASX: GMG). The partners are steadily building large warehouses on land that used to be owned by Brickworks.

Two of the biggest projects are warehouses for Coles Group Ltd (ASX: COL) and Amazon. Once these are completed over the next year or two, it should lead to a large increase of both the property portfolio value and rental cashflow.

At the Brickworks share price, it has a grossed-up dividend yield of 4.2%.

More reading

• BHP (ASX:BHP) share price drops despite 10-year iron ore highs
• The Renergen (ASX:RLT) share price is on watch today
• Why the Bega Cheese (ASX:BGA) share price is at a 52-week high
• Why the Commonwealth Bank (ASX:CBA) share price is flying right now
• 2 compelling ASX 200 shares that should be in your portfolio

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) share prices are slipping today after a news report the banks are facing a class-action lawsuit for their insurance products.

At market open, the ANZ share price is down 1.8% to $28.35, the Commonwealth Bank share price is flat at $87, while the Westpac share price is down 1.17% to $24.95.  

Big four banks under fire for consumer credit insurance

The big four banks are under fire for their consumer credit insurance (CCI), which is marketed as protecting consumers against late or missed payments.

In reality, the insurance pays out less than 10 cents for each dollar paid in premiums. This is compared to an average of 89 cents for every dollar paid in car insurance premiums.

During the banking royal commission, it was revealed Australia’s big four banks were warned by executives and international banks of the dodgy practices more than 10 years ago, but refused to stop selling CCI to customers.

All four of Australia’s major banks were hit with class actions over their CCI products, but National Australia Bank Ltd (ASX: NAB) already settled in 2019, paying out $49.5 million to almost 50,000 customers.

ASIC taking Westpac to court

Practice Group Leader at law firm Slater and Gordon, Andrew Paull, told the ABC that CCI had been sold to millions of Australians.

“It’s known as junk insurance because for any normal person it’s incredibly low value,” he said.

“We’re talking perhaps one in four Australian households that are being sold a complex and worthless financial product by one of the trusted big four banks.”

Meanwhile, the Australian Securities and Investments Commission (ASIC) is taking Westpac to court over its CCI deals, alleging it mis-sold CCI to 400 customers who hadn’t agreed to buy it through credit card bundle deals. ASIC is seeking a fine as punishment.

In a statement, Westpac said it was “carefully considering these claims and is committed to working constructively with ASIC through the court process”.

More reading

• ANZ Bank’s (ASX:ANZ) profit result could get an extra boost: Macquarie
• Why the Commonwealth Bank (ASX:CBA) share price is flying right now
• 3 sectors Aussies are splashing cash on right now
• 650,000 Aussies sign up for Afterpay (ASX:APT) Mastercard
• Westpac (ASX:WBC) reports ‘extraordinary’ Australian consumer confidence

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 market may be sinking lower today but that hasn’t stopped the Corporate Travel Management Ltd (ASX: CTD) share price from charging higher.

In morning trade, the corporate travel specialist’s shares are up 5% to $20.02.

Why is the Corporate Travel Management share price soaring?

Investors have been buying Corporate Travel Management shares this morning following the release of a positive trading update.

According to the release, during the month of March, the company broke-even following an uptick in travel demand.

Pleasingly, things are expected to improve further, with management forecasting a return to profit in the fourth quarter of FY 2021. This is being underpinned by the UK/EU and ANZ regions of the business.

ANZ region

The release explains that strong domestic demand in the ANZ region means that client activity is nearing pre-pandemic levels.

For example, last week total client activity climbed to 85% of FY 2019 booking levels in the local market. New Zealand was particularly positive, with trading above 160% of FY 2019 booking levels during the period.

Europe and US

Positively, despite lockdowns in the UK and Europe, significant essential travel client wins in this region have continued to contribute profitability to the company.

Whereas over in the US, the company is experiencing positive signs of activity recovery.

Furthermore, it notes that these regions have the most advanced vaccination rollouts and are on track for all people over 18 years of age to be vaccinated by June/July.

This supports expectations of rapid return to corporate domestic travel and meaningful levels of pan-European and trans-Atlantic travel after the northern hemisphere summer vacation.

Given that ~70% of pro forma FY 2019 revenue was generated from the US and the UK, this is very encouraging for the company.

Balance sheet remains strong

Another positive supporting the Corporate Travel Management share price is its balance sheet update.

At the end of March, the company had net cash of approximately $105 million with no debt and an undrawn line of credit of 100 million pounds.

Management believes this leaves the company well positioned for any industry consolidation that may occur.

The company’s Managing Director, Jamie Pherous, commented: “It is very clear from both customer feedback and client activity that businesses are keen to get back on the road. Corporate travel and company success are highly correlated – the ability to connect face-to-face supports businesses to grow at speed, improve supply chain and productivity gains, and for companies and their employees to align on strategy in ways that virtual environments simply cannot match.”

“Now that both the US and UK markets are well advanced in their vaccination programs, with adults ‘at risk’ and over 50s largely vaccinated, travel restrictions are on the verge of being relaxed. This will allow businesses in these regions to gain a competitive advantage on the rest of the world in economic trade and recovery, and we expect that recovery to accelerate further by June/July based on the majority of all adults being vaccinated,” he added.

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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 and has recommended Corporate Travel Management Limited. 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 Corporate Travel Management (ASX:CTD) share price is soaring today appeared first on The Motley Fool Australia.

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There are high expectations for ASX banks ahead of next month’s reporting season and the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price could be a standout.

The analysts at Macquarie Group Ltd (ASX: MQG) extrapolated the strong results from US banks. It believes the ANZ Bank share price could be the biggest winner on the back of the US trend.

Banks in the US have posted around 14% year-on-year growth in trading income for the first quarter of calendar 2020.

US profits bolstering earnings expectations for ASX banks

This is a significant indicator for ASX banks. Trading and markets income are one of the most difficult things to forecast for our sector.

“While Australian banks composition of markets and trading income differs from the US banks with a more significant proportion of revenue coming from rates and FX, recent trends from US investment banks suggest further upside risk in markets income in 1H21,” said Macquarie.

“Our analysis highlights that ANZ appears to be more leveraged to the trends observed from offshore peers.”

Why ANZ Bank has most to gain

This is because ANZ Bank has a larger global markets business compared to the other three big banks.

Macquarie calculated that there is around a 90% correlation between ANZ Bank’s income relative to US banks.

This doesn’t mean that the National Australia Bank Ltd. (ASX: NAB) share price and Westpac Banking Corp (ASX: WBC) share price won’t benefit from the upbeat trend in the US.

But their income is less correlated to the US, while Commonwealth Bank of Australia (ASX: CBA) is only slightly correlated, added Macquarie.

ASX banks getting an earnings upgrade

For this reason, the broker upgraded ANZ Bank’s FY21 cash earnings forecasts by 1.9%. The other three banks got a modest upgrade of between 0.3% and 0.6% each.

On the other hand, I suspect the favourable US banking results is even better news for the Macquarie share price.

Afterall, our home-grown investment bank has an even larger exposure to global markets than our domestic banks.

The big four generate most of their earnings from home loans. This is why investors already have high hopes for ASX banks heading into the May reporting season.

As it stands the share prices of ASX banks have outperformed the S&P/ASX 200 Index (Index:^AXJO) in the past few months.

Skyrocketing residential prices and a big jump in demand for mortgages are big profit tailwinds for ASX bank shares.

More reading

• Why the Commonwealth Bank (ASX:CBA) share price is flying right now
• 3 sectors Aussies are splashing cash on right now
• 650,000 Aussies sign up for Afterpay (ASX:APT) Mastercard
• Westpac (ASX:WBC) reports ‘extraordinary’ Australian consumer confidence
• Treasurer outlines federal budget focus as IMF upgrades Australian outlook

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ANZ Bank’s (ASX:ANZ) profit result could get an extra boost: Macquarie appeared first on The Motley Fool Australia.

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