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Like most tech shares today, the Splitit Ltd (ASX: SPT) share price is sinking deep into the red this morning.

At the time of writing, the buy now pay later provider’s shares are down 4% to $1.14.

Why is the Splitit share price sinking?

A selloff of tech shares this morning is dragging the Splitit share price lower and appears to have overshadowed its full year results release.

At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down over 5.3%.

This follows a very poor night of trade on Wall Street’s Nasdaq index after bond yields continued to climb.

How did Splitit perform in FY 2020?

For the 12 months ended 31 December, Splitit reported a 179% increase in Merchant Sales Volume (MSV) to US$246 million.

Based on its fourth quarter performance, the company’s MSV annualises to US$345 million. This is 40% higher than its FY 2020’s MSV.

This led to the company reporting a 300% increase in gross revenue to US$8.4 million.

However, also growing was its loss after tax, which came in at US$25.47 million. This compares to a loss of US$21.47 million and leaves it with a cash balance of US$92.8 million.

What were the drivers of its growth?

Splitit’s growth was underpinned by increases in customer and merchant numbers, plans, and average order sizes.

At the end of the period, the company had 231,000 active shoppers on its platform. This was up 94% on the prior corresponding period.

From these, the company achieved a 94% increase in initiated plans to 257,000 and a 45% lift in average order value to US$949.

Management commentary

Splitit’s CEO, Brad Paterson, commented: “Splitit delivered a breakout year with record financial and operational results in FY20, despite a globally challenging year due to the COVID-19 pandemic. Our annualised MSV hit US$345M in Q4 and revenue (non GAAP) increased 300% to US$8.4M, annualised to US$11.6M in Q4.”

“We formed foundational partnerships with Stripe, Visa and Mastercard during the year which enabled innovation and is beginning to accelerate merchant acceptance. With our new US$150M receivables warehouse funding facility from Goldman Sachs in place, we are expecting to deliver another step change in growth in 2021.”

No guidance was given for the year ahead. However, management advised that it expects its MSV and revenue growth trajectory to continue.

Following today’s decline, the Splitit share price is now down 12% in 2021.

More reading

• The IOUpay (ASX:IOU) share price is skyrocketing 30% today
• Why the QuickFee (ASX:QFE) share price is falling 8% lower today
• Why is the Splitit (ASX:SPT) share price underperforming Afterpay and Zip?
• Why the Splitit (ASX:SPT) share price is roaring 7% higher today
• ASX 200 rises 1%, Zip soars, REA reports

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Lynas Rare Earths Ltd (ASX: LYC) share price has opened 3.57% lower this morning after the mining giant reported a jaw-dropping 944% increase in net profits.

At the time of writing, Lynas shares are swapping hands for $5.44. Yesterday, the Lynas share price closed 1.39% lower to end the day at $5.66.

What did Lynas report?

The Malaysian/Australian mining corporation announced a net profit after tax of $46.1 million for the six months ending 31 December 2020. In the previous corresponding period (pcp) net profits were $3.9 million.

The enormous lift in profits were a result of multiple factors. Revenue was up $22 million ($202 million total) on the pcp. Expenses from normal activities went down by $1 million ($151 million total) on the pcp. This equates to a gross profit of $51.7 million – an 81% increase on the pcp.

The even greater increase in net profits was driven by a stronger Australian dollar in the period, which converted a net foreign exchange loss of $350,000 to a gain of $9.1 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were reported at $80.6 million. This is an increase on the pcp, which was $44.2 million. Earnings per share (EPS) for the reporting period was $4.87 – an 870% increase on the pcp.

The rare earth mining company also reported it would pay back approximately $1 million in JobKeeper subsidies and its Malaysian equivalent.

The company stated it would not pay a dividend for the half-year period.

Company profile

Lynas is a leading rare earths producer with a portfolio of aligned assets to explore, develop, mine and process rare earth minerals. Assets include its Mt Weld mine and Mt Weld Concentration Plant in Western Australia, and a manufacturing facility in Malaysia. The company’s Mt Weld resource is among the highest-grade rare earth mines in the world.

According to Geoscience Australia, rare earth minerals have a variety of applications including magnets and super magnets, motors, metal alloys, electronic equipment, batteries, catalytic converters, petroleum refining, medical imaging, and more.

Words from the CEO

Lynas Rare Earths CEO and Managing Director, Amanda Lacaze, commented on the results: “This half-year demonstrated our ability to achieve strong results across all key financial metrics, while running production at 75% of Lynas NEXT rates.”

Lacaze added:

Despite ongoing uncertainty in the global economy and logistics/supply chain systems due to the effect of the pandemic, Rare Earths market settings were favourable and pricing for Rare Earths materials improved. The drive and discipline of the whole Lynas team has enabled us to meet the challenges posed by the pandemic whilst delivering strong results.

Future endeavours

Lynas raised $425 million in equity during the period, which the company stated would be used to fund the “Lynas 2025 project.” The project consists of a new Kalgoorlie Rare Earth Processing facility and “associated upgrades at the Lynas Malaysia plant.”

The company’s work with the US Defence Department (DoD) also continues. Phase 1 work on the US-based Heavy Rare Earths separation facility is due for completion at the end of FY21. At the same time, the Light Rare Earths separation plant progress will receive $60 million in funding from both the DoD and Lynas, divided equally.

Potential risks

As a part of its report, Lynas listed a variety of potential risks to operations, including:

• Political risk from the recent change of government in Malaysia
• Environmental risks resulting from a hypothetical breach of regulations on air quality, groundwater, and wildlife protection
• Changes to taxation law and mining royalties in both Australia and Malaysia, and
• Climate change risks, such as increased capital and operational costs, increased regulation on mineral extraction, reputational risk, and increasing extreme weather phenomena hampering operations.

Lynas share price snapshot

While Lynas shares are under pressure this morning, the Lynas share price has been on an upward trajectory over the past year. On 28 February 2020 shares were trading at $1.82, so the current level marks a 190% increase. 

More reading

• Will Wall Street’s overnight tumble send ASX 200 shares down today?
• Why the Afterpay (ASX: APT) share price is down 8% today
• These ASX 200 shares are trading near 52-week highs 
• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
• These were the best performing ASX 200 shares last week

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) is down 1.85% at 6707 points in early trade today as US indices were sold off overnight across the board. 

The S&P500 (INDEXSP: .INX) closed 2.45% lower, the Dow Jones Industrial Average (INDEXDJX: .DJI) was down 1.75%, and the Nasdaq Composite (INDEXNASDAQ: .IXIC) was hit the hardest, down 3.52%. 

What’s driving the selloff? 

Long term US interest rates, otherwise known as bond yields, have continued to push higher, briefly touching 1.60% last night. 

The initial COVID-19 induced selloff back in March 2020 triggered bond yields to nosedive into record low territory. After going as low as 0.50%, bond yields have made a steady recovery to close at 1.52% this morning. 

Higher yields flag higher borrowing costs and inflation, which could have a negative impact on businesses and the performance of equity markets.

Lower interest rates can put upward pressure on stock prices. As bond buyers receive a lower interest rate and less return on their investment, it forces them to consider buying higher-risk investments such as shares to get a better return. 

How will this impact ASX 200 shares?

If the ASX follows the US market this morning, it’s worth noting that ASX 200 tech shares could be the worst off given the greater selloff for the tech-heavy Nasdaq. 

In a higher interest rate environment, companies with high free cash flow in cyclical sectors such as financials, materials, utilities and real estate tend to perform better. 

A similar narrative to Tuesday 

Higher bond yields triggered a similar selloff on Tuesday, where ASX 200 shares such as Afterpay Ltd (ASX: APT), Lynas Rare Earths Ltd (ASX: LYC), Zip Co Ltd (ASX: Z1P), Domino’s Pizza Enterprises Ltd (ASX: DMP) and Seek Limited (ASX: SEK) were all down north of 5%. 

Despite household ASX 200 growth shares being sold down, the broader market closed 0.86% higher on Tuesday. This was driven by gains across financials, notably the big four banks, mining and real estate. 

More reading

• Lynas (ASX:LYC) share price dips despite posting 944% increase in net profits
• Why the Afterpay (ASX:APT) share price is sinking 14% today
• Where next for the Afterpay (ASX:APT) share price?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited and SEEK 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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BWX Ltd (ASX: BWX) shares are getting a makeover this morning following the release of the company’s half-year results (1H21). At the time of writing, the BWX share price has leapt 10.95% to $4.46.

Let’s take a look at how the beauty and skincare company has been performing. 

Profit glow up

BWX reported a revenue increase of 0.6% to $84.5 million compared to $84.1 million in revenue during the prior corresponding period (pcp).  

But the news boosting the BWX share price this morning is that the company’s net profit after tax (NPAT) was up 133.1% to $9.9 million next to 1H20’s earnings of $4.2 million.

Earnings per share (EPS) also hopped up from 3.4 cents in 1H20 to 7.2 cents in 1H21.

Meanwhile, earnings before interest, tax, depreciation and amortisation (EBITDA) surged 53.5% to $17.5 million in 1H21 compared to 1H20 EBITDA of $11.4 million.

At the end of the period, BWX held $337.2 million in net assets, which is an increase from the $298.8 million posted at the end of 1H20.

Net cash flow from operating activities rang in at $9.8 million jumping up from $8.3 million in the pcp.

The business finished the half with an improved cash position of $77.7 million. Its net debt also improved and was $12.1 million as of 31 December 2020.

BWX paid a 2021 fully franked interim dividend of 1 cent per share compared to the 2020 interim payment of 1.3 cents per share.

CEO comments

Commenting on the half-year performance, BWX Group CEO and managing director Mr Dave Fenlon said:

The 2021 financial year continues to require a proactive and responsive approach to managing through the global pandemic. While each of our key markets are at varying stages of recovery, BWX has continued to demonstrate resilience during the period and remains committed to delivering on our revenue and earnings expectations for the full year.

In our Asia Pacific markets, we have continued to strengthen and grow our business by increasing accessibility to our brands both in-store and online. Our American and European operations, however, have been more challenged by the external environment, and sales in these regions were impacted by retailer closures and COVID-19 related out-of-stock and supply chain issues.

BWX further advised that it is on track to meet full-year FY21 guidance of at least 10% revenue and 10% EBITDA growth.

BWX share price snapshot

Over the last six months, the BWX share price has fallen by around 7%. However, in the past year, BWX shares have gained around 10%. Based on the current BWX share price, the company has a market capitalisation of approximately $577.7 million. There are presently 139.5 million shares outstanding.

More reading

• Why the Afterpay (ASX:APT) share price is sinking 14% today
• Here’s why the Sezzle (ASX:SZL) share price is down 10% today
• Kogan.com (ASX:KGN) share price sinks 9% following half year results
• Austal (ASX:ASB) share price on watch following profit surge
• AMP (ASX:AMP) share price on watch with proposed $2.3bn joint venture

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX 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 Afterpay Ltd (ASX: APT) share price has returned from its trading halt on Friday.

At the time of writing, the payments company’s shares are down 14% to $116.00.

Why was the Afterpay share price in a trading halt?

Following the release of its half year results yesterday, Afterpay requested a trading halt so it could undertake a capital raising.

This morning the company announced the completion of the capital raising and revealed that strong demand led to management upsizing it.

According to the release, the company has raised $1.5 billion via an unsecured zero coupon convertible notes offering. This compares to its original target of $1.25 billion.

These notes are due 2026 and are convertible into fully paid ordinary Afterpay shares with an initial conversion price of $194.82. This represents a 45% premium to the Afterpay share price prior to the trading halt.

The company intends to use the proceeds of the convertible notes offering to increase its stake in the Afterpay US business and provide additional capital to continue to accelerate underlying sales growth.

Following completion of the offering, the company’s underlying interest in Afterpay US will increase from 80% to up to approximately 93%. Management notes that the acquisition price is accretive to Afterpay shareholders across gross merchant value, revenue, and customer multiples.

Management sells shares

In addition to the above, the company announced that its Co-CEOs and Executive Directors, Anthony Eisen and Nicholas Molnar, have each sold 450,000 shares.

This sale was undertaken at $134.36 per share, which represents a total consideration of approximately $60 million each.

Furthermore, the two Co-CEOs announced plans to establish Private Ancillary Funds (PAF) for charitable purposes.

While they are both still in the early stages of setting up their respective Funds, each Co-CEO intends to transfer approximately 950,000 Afterpay shares into their respective PAF from their personal shareholdings in the near future. They will, however, retain voting rights over these shares.

Why is the Afterpay share price down 14%?

As well as coming under pressure from the capital raising, the Afterpay share price has been hit hard by a selloff on Wall Street overnight.

The selling has been strongest in the tech sector, leading to the S&P/ASX All Technology Index (ASX: XTX) falling 4% this morning.

More reading

• Where next for the Afterpay (ASX:APT) share price?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops
• ASX 200 up 0.85%: A2 Milk & Zip shares hammered, Afterpay to raise $1.25bn
• Afterpay (ASX:APT) delivers more explosive growth and launches $1.25bn notes offering

Motley Fool contributor James Mickleboro 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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The Sezzle Inc (ASX: SZL) share price has come under pressure on Friday.

In morning trade, the buy now pay later provider’s shares are down 10% to $9.00.

Why is the Sezzle share price tumbling lower?

While Sezzle has released its full year results today, the catalyst for the selling appears to be weakness in the tech sector following a selloff on Wall Street overnight.

At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down 4%.

What about Sezzle’s results?

Sezzle had another strong year and reported explosive growth in its underlying merchant sales (UMS) and total income.

For the 12 months ended 31 December, the company posted a 250.8% increase in UMS to US$856.4 million.

Thanks to a 39 basis points increase in its total income to UMS margin to 6.9%, Sezzle delivered a 272.1% jump in total income to US$58.8 million.

Combined with improvements in its cost of income and a decline in net transaction losses, this supported a 120 basis points increase in its net transaction margin (NTM) to 1.4%.

However, this NTM is still trailing its rivals, though. Yesterday Zip Co Ltd (ASX: Z1P) revealed that its US-based QuadPay business has a +2% NTM and Afterpay Ltd (ASX: APT) reported an NTM of 2.2%.

As with its peers, Sezzle’s operations are still making a loss. It recorded a loss after tax of US$31.9 million for the 12 months. This left it with total cash of US$89.1 million at the end of December.

Outlook

Positively, Sezzle revealed that 2021 is off to a strong start with UMS of US$117.8 million in January. This was 65.1% higher than the average monthly performance in 2020. It is also the company’s best monthly performance on record.

In light of this, the company is predicting further strong growth in FY 2021. It believes it will achieve an annualised UMS run rate in excess of US$2.5 billion by the end of 2021.

Sezzle CEO, Charlie Youakim, commented: “We are excited about the momentum in our business reflected in the velocity of signups for both consumers and merchants. 2021 is off to a good start, as January’s UMS of US$117.8 million was a record and 65% above our average monthly pace in 2020. We are also pleased to provide UMS guidance for Sezzle to achieve an annualized run rate UMS of US$2.5 billion by the end of 2021.”

More reading

• Up 35% in February, can the Sezzle (ASX:SZL) share price go higher?
• Sezzle (ASX:SZL) share price tumbles despite new agreement
• Why is the Splitit (ASX:SPT) share price underperforming Afterpay and Zip?
• Why the Sezzle (ASX:SZL) share price is charging 7% higher today
• Zip (ASX:Z1P) share price is soaring 13%, smashing another record high

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’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle 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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The Kogan.com Ltd (ASX: KGN) share price is sinking lower on Friday morning.

At the time of writing, the ecommerce company’s shares are down 9% to $14.10.

Why is the Kogan share price sinking lower?

Investors have been selling Kogan shares on Friday following weakness in the tech sector and the release of its highly anticipated half year results.

For the six months ended 31 December, the company reported a 97.4% increase in gross sales to $638.2 million and an 88.6% jump in revenue to $414 million.

In respect to earnings, the company’s gross profit increased 126.2% to $112.9 million and its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew 184.4% to $51.7 million.

And on the bottom line, adjusted net profit after tax rose 250.2% to $36.5 million and reported net profit after tax grew 164.2% to $23.6 million. The adjusted result excludes unrealised foreign exchange losses, equity-based compensation, and COVID impacts.

In light of its strong performance, the Kogan board declared a fully franked interim dividend of 16 cents per share. This is up 113.3% on last year’s interim dividend.

What were the drivers of its growth?

A key driver of the company’s growth was a 76.8% increase in Kogan.com active customers over the prior corresponding period to 3 million. This was supported by growth in Mighty Ape active customers to 719,000.

Also growing strongly was its Kogan First loyalty program. This Amazon Prime-style offering gives investors free shipping on their orders, among other benefits. However, management hasn’t provided details on membership numbers.

In respect to its segments, the Exclusive Brands and Kogan Marketplace segments were arguably the stars of the show. Exclusive Brands revenue grew 114.9% and Kogan Marketplace reported a 194.3% in gross sales.

Outlook

During the second half, the company plans to further expand its Exclusive Brands, enhance and develop Kogan Marketplace, complete the integration of Mighty Ape, and further grow its active customer base.

Consistent with prior years, Kogan will not be providing earnings guidance. Instead, it intends to provide regular business updates during the period.

Speaking of which, in January, Kogan’s unaudited management accounts show that gross sales grew more than 45%. This was driven by 111.6% growth in Kogan Marketplace and 54.6% growth in Exclusive Brands.

Positively, gross profit grew more than 102% and adjusted EBITDA grew more than 90%.

But as strong as this was, the Kogan share price hasn’t been able to withstand heavy selling in the tech sector today.

More reading

• 5 things to watch on the ASX 200 on Friday
• 2 highly-rated ASX growth shares to buy
• These ASX retail shares are smashing sales expectations
• 3 explosive ASX growth shares to buy next week
• Got cash to invest? Here are 2 ASX shares to buy

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 Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Austal Limited (ASX: ASB) shares will be on watch today following the release of the company’s first-half results. At market close yesterday, the Austal share price finished the day 2.7% higher at $2.30.

Let’s take a closer look and see how the shipbuilder’s performance has tracked for the period.

Why will the Austal share price be in focus?

The Austal share price could be on the move today as investors digest the company’s latest results.

According to its release, Austal delivered a robust performance despite continuing to navigate through COVID-19 challenges.

For the six months ending 31 December 2020, Austal reported total group revenue of $840.3 million. While this reflected a 19% fall from the prior corresponding period, the company noted revenue was impacted by a number of factors. These included unfavourable currency exchange movements, a reduction in United States commercial shipbuilding and vessel support activities, as well as longer than expected commissioning of Australian ships.

However, in further news that could impact the Austal share price, earnings before interest and tax (EBIT) rose to $70.5 million, a lift of 17.6% over the H1 FY20 term. The growth was attributed to improved shipbuilding margins in both geographical segments and lower overhead corporate costs.

Net profit after tax (NPAT) surged to $52.4 million, representing a 29% jump on the comparable period.

Austal closed the calendar year with cash in the bank of $371.9 million, and $111.7 million of gross debt. Overall, this leaves the company with a net cash position of $260.2 million, slightly below FY20’s amount of $272.4 million.

The board declared an unfranked interim dividend of 4 cents per share to be paid to eligible shareholders on 22 April 2021. This is a 33% increase over the H1 FY20 interim dividend. Also worth noting is the fact the board has decided not to continue with its dividend reinvestment plan (DRP), holding off until further notice.

CEO commentary

Austal CEO Paddy Gregg touched on the group’s performance, saying:

The strong interim financial results were driven by excellent shipbuilding operating margins in both of our USA and Australasia operations, which flowed through to an enhanced bottom line.

This highlights the success of the pragmatic initiatives Austal has implemented to increase our efficiency, reduce our cost base and set the business up for sustained profitability.

Outlook

Looking ahead, Austal maintained its FY21 EBIT guidance of $125 million and revenue of $1.65 billion. The company noted, though, based on the appreciating Australian dollar against the United States dollar, it may be forced to reassess EBIT and revenue guidance.

Austal share price snapshot

Over the last 12 months, the Austal share price has fallen 37% due to the pandemic heavily weighing down its operations. Just last week, Austal shares sank to a multi-year low of $1.98 following an update on an investigation by United States authorities.

The Austal share price is a long way from its pre-COVID levels of around the $4 mark.

More reading

• ASX 200 goes higher, Afterpay sinks, Adbri impresses
• Why the Austal (ASX:ASB) share price got torpedoed today
• Why Afterpay, Austal, Perenti, & SEEK shares are tumbling lower
• ASX 200 flat: SEEK CEO exits, Afterpay sold off, BOQ surges higher

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 Austal 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 AMP Ltd (ASX: AMP) share price could attract some excitement this morning after it announced a potential joint venture (JV) with Ares Management Corp Class A (NYSE: ARES).

Ares left AMP standing at the alter when it snubbed the opportunity to buy all of AMP. But the ASX company is desperate for some lovin’ as the AMP share price tumbled when Ares walked away.

The two parties may have found a new way forward after they signed a non-binding Heads of Agreement to form a $2.25 billion JV.

AMP’s share price to get $1.6bn boost from JV

The JV will hold AMP Capital’s private markets businesses. This includes infrastructure equity and infrastructure debt, real estate and other minority investments.

If the deal goes through, AMP stands to get a $1.55 billion cash injection before associated costs. Not a bad second prize as the cash represents a third of AMP’s current market capitalisation.

Under the proposed deal, Ares will own 60% of the JV and will have management control. AMP believes this is the best way forward after it failed to find another suitor to lob a full takeover of the embattled wealth manager.

Is AMP’s joint venture with Ares good news?

The rational is that AMP will get a big cash boost, and could potentially fund another special dividend or capital return. AMP’s private markets business is also likely to grow faster under the stewardship of Ares due to its global reach and the extra economies of scale.

Ares had US$197 billion ($250 billion) in assets under management at the end of December 2020. Of that, it managed US$18.3 billion in infrastructure and real estate AUM with over 100 investment professionals in North America and Europe.

AMP shareholders will be able to benefit from the expected accelerated growth in the JV though AMP’s 40% ownership.

Other ways to unlock value in AMP’s share price

Both parties will work exclusively to sign a binding deal over the next 30-days and AMP is free to explore options for its public markets assets that aren’t included in the JV.

One should think there is some value there. AMP Capital’s public markets business made a modest but positive contribution to the group’s net profit in FY20.

These assets include the Multi-Asset Group, which is being restructured and absorbed into AMP Australia, and the Global Equities and Fixed Income (“GEFI”) business. AMP is open to selling the latter two or forming partnerships.

Glass half-full outlook

“We expect [the JV] would strengthen the business and significantly accelerate our strategy to grow private markets, while de-risking our international expansion plans,” said AMP’s chair Debra Hazelton.

“The transaction will enable AMP to increase focus on the transformation of our wealth management business in Australia, drive the continued growth of AMP Bank and New Zealand wealth management and benefit from driving further efficiency.”

AMP shareholders like myself will be keeping our fingers crossed!

More reading

• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• These were the worst performing ASX 200 shares last week
• ASX 200 drops slightly, Telstra rises, AMP sinks
• ASX 200 down 0.1%: Telstra update impresses, AMP sinks, Newcrest jumps
• Why the AMP (ASX:AMP) share price is tumbling 9% today

Motley Fool contributor Brendon Lau owns shares of AMP Limited. Connect with me on Twitter @brenlau.

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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It has certainly been a rough start to the year for Xero Limited (ASX: XRO) shares. After rocketing 84% higher in 2020, the Xero share price has been steadily drifting back to earth so far in 2021.

In fact, Xero shares have slumped by more than 19% in just two months. This is almost two-thirds as much as the company fell by during the COVID-19 induced panic which bottomed out on 23 March last year.

What’s dragging down the Xero share price?

The timing of the slump in the Xero share price does seem odd. Vaccines are being rolled out at a rapid rate and new cases of COVID-19 in the United Kingdom and United States have been plunging. In fact, we have never been closer to an end to the pandemic. Surely this would be good news for Xero’s small business customers?

With no material company announcements in 2021, one possible factor dragging down the Xero share price is the prospect of rising interest rates. As economic activity starts to pick up again, we are likely to see some of the emergency measures used to keep the economic heart beating being eased. This means we could be waving good-bye to record low interest rates.

Rising interest rates can be bad news for a company’s share price because future earnings get discounted at a higher rate, reducing its fundamental value.

Another possibility for the drift lower is simply that the Xero share price got caught up with the post-COVID tech rally and the market got ahead of itself. This was amplified when Xero was added to the MSCI Global Standard Index late last year, boosting interest in the company.

Should you be worried?

Neither factor, interest rate worries or shifting investor sentiment, is really related to how Xero’s business is performing. Is Xero likely to see lower subscriber growth because of COVID-19? Absolutely, but that is not new information.

In the six months to September 2020, Xero announced it had slashed spending on advertising and marketing in response to the pandemic which would slow growth. Even then, Xero added 168,000 new subscribers during the period and grew free cash flow from NZ$4.8 million to NZ$54.3 million.

It’s worth remembering too that in the five years to 31 March 2020 Xero was able to grow revenue at a compound annual growth rate of 36%! Xero’s full-year FY21 results are due to be released on 13 May 2021 and investors will be paying keen attention to how the company plans to revive growth again for the years ahead.

More reading

• 3 explosive ASX growth shares to buy next week
• One year on and 50% up, the All Technology Index is booming
• 2 exciting ASX tech shares to buy
• 3 of the best ASX shares you can buy right now
• 3 reasons why the Xero (ASX:XRO) share price could be a buy

Motley Fool contributor Regan Pearson owns shares of Xero. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why is the Xero (ASX:XRO) share price down 19% in 2021? appeared first on The Motley Fool Australia.

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