Tag: Motley Fool

  • Why the CV Check (ASX:CV1) share price will be on watch this morning

    asx share price on watch represented by investor looking through magnifying glass

    The CV Check Ltd (ASX: CV1) share price will be on watch this morning following the company’s release of a business update. At yesterday’s market close, the online integrated screening and verification company’s shares finished the day at 14.5 cents.

    Let’s take a look at what CV Check provided investors with late Monday evening.

    Best sales on record

    The CV Check share price could be on the move today after the company advised it delivered a robust performance for the March quarter.

    According to its release, CV Check reported strong trading conditions throughout February. This resulted in the company achieving a new all-time sales record for the month, and the 12-month booked annual recurring revenue (ARR).

    The strong sales growth came from new customer wins, as well as high-order volumes driven by its established customer base.

    CV Check noted that sales are continuing to run into March – the final month of Q3 FY21.

    In addition, the company highlighted that the Bright People Technologies acquisition is on track. Settlement is expected to occur sometime in early April.

    CV Check CEO Rod Sherwood commented on the company’s solid performance:

    A very strong couple of months have kicked off the calendar year. A strong January was followed by new all-time revenue records being set in February for both a single month of sales and the booked 12-month ARR. Growth is being driven by both new customer wins and high order flow from long standing customers who are active in bringing on new hires and re-compliance screening. March sales volume as experienced to date continues to be very strong.

    CV Check share price snapshot

    The CV Check share price has gained over 100% in the past 12 months, but lost over 20% year to date. The company’s shares reached a 52-week high of 21 cents in February when news of the acquisition came to light.

    Based on valuation grounds, CV Check has a market capitalisation of around $51.5 million, with 355.2 million shares on issue.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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    Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended CV Check 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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  • Where to invest your BHP (ASX:BHP) dividends

    Young female investor holding cash ASX retail capital return

    Today is a big day for BHP Group Ltd (ASX: BHP) shareholders with the mining giant scheduled to pay its latest dividend.

    BHP is paying eligible shareholders a fully franked $1.31 per share interim dividend. This means a whopping US$5.1 billion is heading into shareholders’ bank accounts this morning.

    If you’re planning to reinvest these funds into the share market, then you might want to consider the ASX shares listed below. Here’s what you need to know about them:

    REA Group Limited (ASX: REA)

    The first ASX share to consider buying with these dividends is REA Group. It is the dominant player in real estate listings in the Australian market with its realestate.com.au website. The company also owns and operates a number of complementary businesses in Australia and other listings websites around the globe.

    After a couple of difficult years because of the housing market downturn and COVID-19, REA Group looks well-placed for strong growth over the medium term. This due to the booming housing market, new revenue streams, cost cutting, and its growing international operations. 

    One broker that is particularly positive on the company is Morgan Stanley. It currently has an overweight rating and $175.00 price target on its shares.

    ResMed Inc. (ASX: RMD)

    Another ASX share to look at is ResMed. It is a sleep treatment-focused medical device company with a growing portfolio of industry-leading products.

    ResMed has consistently delivered solid sales and earnings growth over the last decade. This has underpinned market-beating returns for its shares, much to the delight of shareholders.

    The good news is that the next decade looks just as positive thanks to its strong market position, growing cloud business, the ever-increasing awareness of sleep disorders, and the shift to home healthcare.

    Morgans is a big fan of ResMed. Its analysts currently have an add rating and $30.09 price target on its shares.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited and ResMed Inc. 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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  • Top brokers name 3 ASX shares to buy today

    Australia’s leading brokers are always on the lookout for the best ASX shares to buy.

    Brokers don’t always get it right, but they are often on the money. They regularly update their view on different businesses as share prices change or when that ASX share releases an important announcement, such as a result.

    These three ASX shares have been rated as buys recently:

    Volpara Health Technologies Ltd (ASX: VHT)

    Volpara has been rated as a buy by Morgans as it highlighted the benefits of the CRA Health purchase and the benefit of growth of its average revenue per user (ARPU). The share price target is $1.94.

    A few weeks ago, Volpara announced that it was acquiring Boston-based CRA Health for US$18 million with another potential US$4 million payable based on meeting certain targets.

    Volpara explained that CRA is profitable, with annual recurring revenue (ARR) of over US$4 million, average revenue per user (ARPU) of around US$1.70 and coverage of around 6% of US breast screenings. CRA software is integrated with major electronic health record and genetics companies.

    This acquisition increases Volpara’s market share to over 30%. It also increased the group ARPU to over US$1.40.

    A couple of weeks ago, Volpara revealed that CRA Health had won a contract that covered the provision of breast cancer risk scores to a large Indiana-based organisation that has sites across more than 20 states and runs a major electronic health record system. It was the biggest in Volpara’s history.

    BWX Ltd (ASX: BWX)

    Natural beauty business BWX has been rated as a buy by the broker Citi. It has a price target of $5.35.

    Citi noted that the company is seeing less engagement on social media recently, but if it can increase that with users then it could help growth in the future. But, the natural beauty business is focusing its efforts on the domestic retail sector – this may lead to a better payoff for the company.

    In the FY21 half-year result the ASX share reported net revenue grew by 0.6% to $84.5 million, or 3.4% in constant currency terms. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up by 1.4% to $11.7 million.

    BWX said that the Chemist Warehouse equity partnership will continue to fuel growth of Sukin, Andalou Naturals and Mineral Fusion in Australia and international markets. The Woolworths Group Ltd (ASX: WOW) partnership will see Sukin launched in 930 Woolworths stores. It has also achieved distribution gains in North American retailers including in Walmart (Canada) and Mineral Fusion in Wholefood Markets.  

    Clover Corporation Limited (ASX: CLV)

    Clover is a business that aims to deliver science-based bioactives into products such as infant formula.

    The ASX share is rated as a buy by the broker Ord Minnett, which has a price target of $2.37 for the ASX share.

    Clover is suffering from reduced demand for infant formula, however it is also staying on top of its costs. Whilst demand is low, the broker pointed out that it has a good customer base that will lead to potential upside when daigou and other demand returns.

    In the recently-released FY21 half-year result it showed a 21.7% decrease in net sales revenue to $29.4 million and a 45.8% reduction in net profit after tax (NPAT) to $2.5 million.

    Clover is still confident about the future, saying that the fundamentals of the business remain strong with opportunities for growth across markets and segments currently curtailed by COVID-19.

    It’s expecting FY21 revenue to be in the range of $60 million to $70 million.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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    Tristan Harrison 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 VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended VOLPARA FPO NZ. 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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  • LIVE COVERAGE: ASX to fall; tech could climb

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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    Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Apple and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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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  • 3 exciting small cap ASX shares to watch

    ASX share price on watch represented by man peering closely at computer screen

    If you’re a big fan of investing in small cap shares, then you might want to look at the ones listed below.

    Here’s why these three ASX small cap shares could be ones to watch:

    Audinate Group Limited (ASX: AD8)

    Audinate is digital audio-visual networking technologies provider. It is the company behind the industry-leading Dante audio over IP networking solution. Audinate’s solutions replace point-to-point audio and video connections with easy-to-use, scalable, flexible networking. They have been adopted by hundreds of manufacturers in thousands of professional products, making its products the de facto standard for modern AV connectivity. While demand was very soft during the pandemic, sales are expected to increase materially once the crisis passes. 

    UBS currently has a buy rating and $10.10 price target on the company’s shares.

    Booktopia Group Ltd (ASX: BKG)

    Another small cap to watch is Booktopia. It is an online book retailer which, unlike Audinate, has been in fine form during the pandemic. For example, during the first half of FY 2021, the company reported a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million. This was driven by the shift to online shopping and its investment in a new distribution centre. The latter allowed the company to take advantage of the increased demand by shipping more books than ever before.

    Last month Morgans put an add rating and $3.53 price target on Booktopia’s shares.

    Universal Store Holdings Limited (ASX: UNI)

    Universal Store is a fashion retailer for the 16-35 year old fashion-focused consumer. It aims to deliver an ever-changing and carefully curated selection of on-trend products to customers. This tactic is working wonders and helped Universal Store deliver a stellar half year result in February. For the six months ended 31 December, Universal Store reported a 23.3% increase in sales to $118 million and a 63.6% increase in underlying net profit after tax to $21.1 million.

    This went down well with analysts at Morgans, who believe more strong growth is coming. The broker currently has an add rating and $8.37 price target on its shares.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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

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  • Time to be bullish or bearish on the Afterpay (ASX:APT) share price?

    asx buy now pay later shares such as zip and afterpay share price represented by finger pressing pay button on mobile phone

    The Afterpay Ltd (ASX: APT) share price has been falling in recent weeks, it’s actually down by around 27% over the last month. That’s a pretty steep decline in a fairly short amount of time. 

    What do brokers think of the Afterpay share price?

    Different brokers have different views of Afterpay shares. UBS doesn’t have much expectation for the Afterpay share over the next year – it has a price target of $36.

    UBS thinks that a problem for Afterpay is the growing amount of competition in the space from large players such as Commonwealth Bank of Australia (ASX: CBA) which could lead to problems relating to the no surcharge rules.

    Merchants currently can’t pass on those costs to customers, but CBA’s merchant fee (and PayPal’s) is actually lower than what Afterpay charges.

    Ord Minnett has a price target of $150 on Afterpay, with the broker being pleased by the continuing northern hemisphere growth.

    Macquarie Group Ltd (ASX: MQG) brokers have set a price target of $140 for the buy now, pay later leader. However, it noted that the rate of growth in Afterpay’s recent half-year result for FY21 is slower than other recent reports.

    How did reporting season go?

    Well, the Afterpay share price has been falling since the report’s release, but there was plenty of growth reported.

    Customer numbers and merchants continue to grow significantly – merchants went up 73% to 74,700 and active customers grew by 80% to 13.1 million.

    The buy now, pay later company continues to see its underlying sales roughly double each report. In the first six months of FY21, underlying sales grew 106% to $9.8 billion. On a constant currency basis, underlying sales would have gone up 112% to $10.1 billion.

    Afterpay’s income from merchants grew by 108% to $374.2 million, or 114% in constant currency terms.

    The company’s gross loss as a percentage of underlying sales improved by 0.3 percentage points to 0.7%, whilst the net transaction margin as a percentage of underlying sales improved by 0.1 percentage point to 2.2%. This led to the net transaction margin growing by 110% to $213.9 million.

    Earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items jumped 521% to $47.9 million.  

    What is management doing to grow profit and the Afterpay share price?

    Afterpay is focused on growth in a number of different areas, particularly when it comes to global growth.

    One area that Afterpay is looking to grow in is Europe with the completion of its Pagantis acquisition which will now occur after regulatory approval being granted by the Bank of Spain.

    Afterpay has revealed that preparation into the launch of Spain, France and Italy is currently underway with over $1 billion global merchants in the process of contracting.

    It’s also looking at Asia as the next stage of growth after establishing a base in Singapore after the acquisition of EmpatKali in August 2020 to drive the potential expansion into South East Asia.

    Afterpay continues to see that its longer-term customers use the buy now, pay later service more and more, which can lead to higher margins with repeat usage.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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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 AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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  • 5 things to watch on the ASX 200 on Tuesday

    ASX share

    On Monday the S&P/ASX 200 Index (ASX: XJO) fought back from a poor start to record a solid gain. The benchmark index rose 0.65% to 6,752.5 points.

    Will the market be able to build on this on Tuesday? Here are five things to watch:

    ASX 200 futures pointing lower

    The Australian share market looks set to edge lower today despite strong gains being recorded in the United States. According to the latest SPI futures, the ASX 200 is poised to open the day 12 points or 0.2% lower this morning. In late trade on Wall Street, the Dow Jones is up 0.55%, the S&P 500 is up 1%, and the Nasdaq is trading 1.6% higher. A pullback in bond yields gave equities a boost.

    Tech shares could jump

    It could be a good day for ASX tech shares such as Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) on Tuesday after US tech stocks stormed higher overnight following a pullback in bond yields. US giants Apple, Facebook, and Tesla are all recording solid gains and helping to drive the tech-focused Nasdaq index 1.6% higher. As the local tech sector has a tendency of following the Nasdaq’s lead, this bodes well for Tuesday’s trade.

    Oil prices edge higher

    Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) will be on watch after oil prices edged higher. According to Bloomberg, the WTI crude oil price is up 0.1% to US$61.47 a barrel and the Brent crude oil price has risen 0.1% to US$64.58 a barrel. Oil prices edged higher despite concerns about European lockdowns and their impact on demand.

    Gold price lower

    Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a subdued day after the gold price edged lower despite bond yields falling. According to CNBC, the spot gold price is down 0.1% to US$1,739.70 an ounce. A switch to risk on assets weighed on the safe haven asset.

    Carsales goes ex-dividend

    The Carsales.Com Ltd (ASX: CAR) share price is going ex-dividend this morning and could trade lower. The auto listings giant will then be paying its fully franked 25 cents per share interim dividend to eligible shareholders next month on 21 April. Elsewhere, BHP Group Ltd (ASX: BHP) shareholders can look forward to being paid its $1.31 per share dividend later today.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

    More reading

    James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended carsales.com 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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  • 2 rapidly growing mid cap ASX shares to buy

    asx dividend shares represented by tree made entirely of money

    If you’re looking for some new additions to your portfolio, you might want to take a look at the mid cap space.

    At this side of the market, there are a number of companies with the potential to grow materially over the next decade or two.

    But which mid cap ASX shares should you buy? Two to consider are listed below:

    Adore Beauty Group Limited (ASX: ABY)

    Adore Beauty could be a mid cap ASX share to buy. It is Australia’s leading online beauty retailer, providing an empowering and engaging beauty shopping experience.

    One of the important differences between Adore Beauty and other retailers is that it is so much more than just a place to shop. Adore Beauty’s website is also a destination for education and entertainment. This means that many beauty consumers frequent its website even when they are not seeking to purchase items.

    At the last count, the company had almost 800,000 active customers. This was up 82% since the end of December 2019, underpinning an 85% increase in first-half revenue to $96.2 million. 

    Positively, when you annualise this figure, it is still only a small portion of an Australian beauty and personal market currently worth ~$11 billion a year.

    One broker that is confident in its outlook is Morgan Stanley. It currently has an overweight rating and $8.35 price target on the company’s shares.

    Megaport Ltd (ASX: MP1)

    Another mid cap ASX share to consider is Megaport. It is a leading global provider of elastic interconnection services across data centres globally.

    With Megaport’s networking equipment now installed in hundreds of data centres across the world, it has created a software layer that provides an easy way for users to create and manage network connections. This allows users to create and run a global network with or without the need for physical infrastructure. Which, given the shift to the cloud, is becoming increasingly attractive for businesses.

    Last month Megaport released its half year results and revealed that its Monthly Recurring Revenue (MRR) has increased 37% to $6.3 million. This annualises to revenue of $75.6 million.

    Goldman Sachs has been pleased with its performance. In response to its result, the broker put a buy rating and $15.55 price target on Megaport’s shares. Goldman believes the company is going to benefit greatly from the migration to public cloud infrastructure.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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

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  • The WAM Active (ASX:WAA) share price hit a new 52-week high today

    The WAM Active Limited (ASX: WAA) share price closed up 3.9% today, trading at a 52-week high of $1.195.

    What happened

    The WAM Active share price was flying today after the company announced strong demand for its share purchase plan (SPP), which, together with its oversubscribed placement, has raised more than $25.2 million.

    The SPP announced in late February allowed shareholders to apply for up to $30,000 in shares at a discounted rate. As a bonus, those who participated will receive the company’s fully franked 3 cents per share dividend on all newly issued shares.

    Participants in the SPP and placement will be entitled to bonus options from this Thursday. Each option provides the holder with the ‘option’ to purchase one WAM Active share for $1.10 without any brokerage fees.

    Management comments

    WAM Active chair Geoff Wilson welcomed the news, saying:

    We greatly appreciate the trust, loyalty and support we have received from WAM Active shareholders.

    More than 840 existing WAM Active shareholders participated in the SPP, which, together with the oversubscribed placement, raised more than $25.2 million.

    Performance update

    WAM Active also recently announced an investment portfolio update for shareholders, stating its investment portfolio increased by 2% in the period.

    At the time of release on 16 March, the company’s net tangible assets equated to $1.02 a share. WAM Active revealed its largest holding was Keybridge Capital Limited (ASX: KBC), with a 9.2% weighting. 

    About the WAM Active share price

    WAM Active is a listed investment management company operating under the Wilson Asset Management umbrella. The portfolio provides investors with “exposure to an active trading style with the aim of achieving a sound return with a low correlation to traditional markets”.

    Over the past 12 months, the WAM Active share price has returned around 32.8% compared to the All Ordinaries Index (ASX: XAO) return of 44% in the same period.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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    Motley Fool contributor Daniel Ewing 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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  • 4 reasons ARK recently increased its Tesla share price target to US$3,000

    A futuristic view of electric vehicle technology with speeding bright light trails indicating power.

    The now infamous ARK Invest updated its Tesla Inc (NASDAQ: TSLA) share price target on Friday – it’s now more bullish than ever.

    Cathie Wood and her team of analysts last year estimated the US electric vehicle (EV) maker’s shares would eclipse US$1,400 by 2024. But, with updated research, the disruptive-focused asset manager now estimates it could hit US$3,000 in 2025.

    Although a year later, the upgraded price target represents a 114% increase on the firm’s prior base case and an implied 358% upside from Tesla’s current price.

    There are four main reasons for the revised price target.

    Less money, more production, higher Tesla share price

    In ARK’s 2025 Tesla share price target, the first reason listed for the target increase is refined capital efficiency. Originally ARK estimated that Tesla would spend US$11,000 to US$16,000 per unit of increased production capacity in 2024.

    However, Tesla announced an anticipated 75% reduction in investment costs over time due to improved cell chemistry and manufacturing processes. Consequently, ARK has lowered its gross capital expenditure estimate per car.

    For this reason, the asset manager now foresees sales somewhere between 5 to 10 million electric vehicles in 2025.

    Take out a policy with Tesla

    In August 2019, Tesla introduced its own vehicle insurance coverage for customers in California. These policies are provided through partnering with underwriters, but ARK believes Tesla could begin underwriting them itself in the next few years.

    In addition to this, the margins on the policies are estimated to be better than average due to the detailed driving data available from the EVs.

    ARK thinks the company could roll out the insurance offering to more states and acquire customers at a low cost, given Tesla’s high safety profile and dynamic pricing ability. In this case, if Tesla sold 40% of its vehicles with its own insurance in 2025, insurance revenue alone could hit US$23 billion annually – and this is in ARK’s bear case.

    Did you request a Tesla for John?

    Human-driven ride-hail is now incorporated into ARK’s Tesla bear case share price. In the bear case, Tesla would deliver a ride-hailing service similar to that of Uber Technologies Inc (NSYE: UBER). However, Cathy Wood’s team believes Tesla could do it with a lower cost structure.

    If implemented, ride-hail could add US$20 billion to Tesla’s operating profit by 2025, by ARK’s estimates. This would also lay the groundwork for an autonomous service while providing a highly profitable recurring revenue stream.

    Highest Tesla share price target = no human driver

    Lastly, ARK’s previous valuation model considered Tesla’s chances of achieving fully autonomous driving before the end of 2024 to be 30%. The revised model has seen the team ambitiously raise the probability to 50% by 2025.

    ARK estimates that if 60% of Elon’s Autopilot-equipped EVs were to serve as robo-taxis’, the company would generate an additional US$160 billion in earnings before interest, tax, depreciation, and amortisation (EBITDA) in 2025.

    Furthermore, in ARK’s targets, electric vehicle sales and robo-taxi business operations account for 40% and 50% of Tesla’s estimated market capitalisation. Additionally, ARK estimates Tesla’s combined operations to generate US$507 billion in revenue by 2025.

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    Mitchell Lawler owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Uber Technologies. 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 4 reasons ARK recently increased its Tesla share price target to US$3,000 appeared first on The Motley Fool Australia.

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