Tag: Motley Fool

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.

In an article published on Dec. 7, I named Airbnb (NASDAQ: ABNB) as my top initial public offering (IPO) stock to buy in December. It has been years since an IPO intrigued me so much, and I took the rare step of selling other stocks in my portfolio in order to buy more shares of the prominent online rental marketplace.

When the initial pricing range for the Airbnb IPO was announced, I planned to make its stock my biggest purchase of the year and one of my biggest holdings. However, my view of the deal eventually changed, and I avoided making a big investment. Here’s why.  

The hype was overwhelming, but valuation still matters

Airbnb is a great company. With an easy-to-use platform that connects travelers and renters with property owners, it has already disrupted the hotel and vacation-rental industry and has plenty of room for long-term expansion. When the initial price range for Airbnb stock was announced at between $44 and $50 per share, valuing the company at as much as $35 billion, my eyes saw dollar signs.

My basic expectation was that shares would probably follow the trend for tech IPOs this year and be bid up well above the IPO price in early trading. However, I still saw plenty of opportunity for big gains on day one and beyond if I could get shares early. In fact, I figured the company had a good chance of reaching a valuation of $100 billion within the next six months.

Then, Airbnb increased its projected IPO pricing range to between $56 and $60 per share — valuing the company at about $42 billion. My thesis held with this first bump, and the news didn’t come as a surprise. Many high-profile tech companies that went public this year also raised their pricing ranges following the initial announcement.

However, things started to look different by the time Airbnb revealed on Dec. 9 that it would be pricing the IPO at $68 per share. The implied valuation of roughly $47 billion was still well below my near-term target level, but warning signs that the IPO was becoming too hot for me were starting to pile up. 

Tech IPOs have been extraordinarily hot this year

By the time Airbnb’s first day of trading rolled around — Dec. 10 — reports emerged that the stock would likely open with shares trading in the range of $150 per share. It’s important to understand how the company’s valuation could more than double before shares even became available to the average investor.

Companies seeking to go public typically turn to large financial institutions to function as underwriters that help with the process. These financial institutions distribute shares to large institutional investors at the IPO price, who then sell shares to smaller but still very large investors before the stock becomes available to the typical retail investor.

In Airbnb’s case, Morgan Stanley and Goldman Sachs functioned as the lead underwriters in the IPO. These institutions apportioned shares to large investors, who then offered the shares in a round of early auction trading that wasn’t available to most of the public. Retail investors like me had to contend with the fact that they are at the bottom of the IPO food chain. 

The market for tech IPOs has been strong, and many companies saw their stocks bid well above their initial listing price before the average investor could get their hands on any shares. The following table looks at some other notable tech IPOs this year and compares their IPO price with their opening price when the stock finally began trading on the market:

Company	IPO price	Opening stock price	Difference
Snowflake	$120.00	$245.00	104%
Palantir*	$7.25	$10.00	38%
Unity Software	$52.00	$75.00	44%
C3.ai	$42.00	$100.00	138%
DoorDash	$102.00	$182.00	78%

Data sources: company filings and Yahoo! Finance. *Palantir went public via direct listing.

Predictably, Airbnb followed suit. Shares opened at $146 per share — 115% higher than the actual IPO price and 192% higher than the top of its original pricing range. That meant the company opened with a market capitalization of roughly $102 billion.

I’m still a big believer in the company, and the hype was tempting. But I opted not to buy in at a level that exceeded my target valuation, at least not to the extent I had planned. 

What happens next?

I wound up passing on Airbnb stock on its first day of trading, but I did purchase a very small number of shares the following day. I was able to buy significantly below opening-day trading prices, but my purchase was small enough to be largely symbolic. 

I think Airbnb has the potential to post strong long-term growth and significantly exceed a valuation of roughly $100 billion. However, I knew that I’d have been getting caught up in hype and ignoring my initial analysis if I went through with making a large investment in the company. My small purchase was a nod to the company’s potential and a psychological anchor to provide extra motivation to follow the business closely and monitor ongoing opportunities to buy the stock. 

Greed can be good, but it pays to be principled

With 471 companies having gone public on the U.S. market year to date, there have been more IPOs this year than ever before. The size of this year’s IPO class surpassed the record previously set in 1999, and more companies have opened trading at double their IPO price than any time since that much-studied year.  

Analysts and market watchers have compared IPO trends across these record years and noted that 1999 was the height of the dot-com bubble, which raises some red flags. The case can be made that the tech economy is at a much more advanced stage than it was roughly two decades ago, while also having a future that’s brighter than ever. At the same time, it’s clear that some valuations in the tech sector have become stretched, and investors buying on momentum has played a big role in IPO performance.

I still love Airbnb as a company and rate its prospects higher than most of this year’s other notable tech IPOs. Despite challenges brought on by the coronavirus pandemic, the business has a promising growth outlook. Strong gross margin, a leadership position in its service category, and unmatched brand strength point to huge potential. 

On the other hand, I made the decision not to follow through with a large investment, because it would have meant throwing out key foundations of my investing thesis to chase market buzz. It’s possible that Airbnb will go nowhere but up from current prices and that I’ll come to regret my decision. However, restraint can be a virtue, and I’m confident that sticking to the principles that shaped my decision will lead to better long-term performance across my portfolio.

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

More reading

• With the high Aussie dollar, is now a good time to buy US shares?
• Here are the US shares ASX investors are buying
• How Aussie tech investors snapped up Airbnb (NASDAQ:ABNB) IPO
• How to get free Airbnb (NASDAQ:ABNB) shares

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

The post Why I didn’t go all in on the Airbnb IPO 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 QBE Insurance Group Ltd (ASX: QBE) share price was a very poor performer on Friday.

The insurance giant’s shares crashed 12.5% lower on the day to end the week at $8.71.

Why did the QBE share price crash lower?

Investors were selling QBE’s shares on Friday after it released an update on its expectations for FY 2020.

That update revealed that the insurer expects to report an adjusted net cash loss after tax of approximately $780 million. This was driven by a combination of COVID-19 costs, elevated catastrophe costs, an increase in prior accident year claims development, and a non-cash write-down in its North American business.

Is this a buying opportunity?

One leading broker believes that investors should be taking advantage of the weakness in the QBE share price to invest.

According to a note out of Goldman Sachs, its analysts have maintained their conviction buy rating and trimmed their price target on the insurance giant’s shares to $10.67.

While it was disappointed with the above, it was encouraged by a number of things. This includes premium rate acceleration, further attritional loss ratio improvement in the second half, consistent COVID cost estimates, and its capital remaining at the upper end of the 1.6x to 1.8x PCA ratio range in FY 2020.

Goldman believes “these elements alongside progress on efficiency (program tracking to plan) continue to point to a solid growth/margin trajectory into FY21/FY22.”

It also sees a lot of a value in the company’s shares at the current level.

The broker explained: “While a disappointing end to a particularly troubled FY20, at 12x our FY21 earnings we continue to think QBE looks attractive relative to growth we forecast and remain broadly comfortable with our thesis given a mix of 1) the hardening global market, 2) more meaningful evidence of operating leverage in FY21+ 3) bottoming investment earnings and 4) solid balance sheet. Maintain our Buy rating (on CL).”

More reading

• 5 things to watch on the ASX 200 on Monday
• Why Mesoblast, Paradigm, Qantas, & QBE shares are tumbling lower
• The QBE (ASX:QBE) share price has plummeted 9% today. Here’s why
• Why ASX shares are in awesome shape vs overseas markets
• Revealed: Shares that’ll shoot up with a COVID-19 recovery

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.

The post Why the QBE (ASX:QBE) share price has been given a conviction buy rating appeared first on The Motley Fool Australia.

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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the ASX with short interest of 14.9%. The online travel agent’s shares tumbled lower last week after an outbreak in New South Wales led to border closures. This may delay the recovery of the domestic travel market.
• Western Areas Ltd (ASX: WSA) has seen its short interest reduce to 10.5%. Short sellers appear to be closing positions after the nickel producer’s shares rebounded following a recent crash. That crash was related to its downgraded production guidance.
• Tassal Group Limited (ASX: TGR) has seen its short interest rise to 10.1%. Short sellers have been targeting the salmon producer amid concerns that salmon could be another item that China puts tariffs on.
• Speedcast International Ltd (ASX: SDA) still has short interest of 9.3%. The communications satellite technology provider’s shares have been suspended for almost the entire year as it undertakes a recapitalisation.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest remain flat at 8.9%. Short sellers appear to believe the market is expecting too much from the travel agent giant. Particularly given the recent outbreak in New South Wales.
• AVITA Therapeutics Inc (ASX: AVH) has 8.9% of its shares held short, which is up week on week once again. Short sellers have been targeting the company this year after COVID-19 impacted its sales. This poor form has put significant pressure on its shares and led to them being dumped out of the ASX 200 at the December quarterly rebalance.
• InvoCare Limited (ASX: IVC) has short interest of 8.7%, which is up slightly week on week. Concerns that this funerals company has been losing market share appear to be weighing on investor sentiment.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest fall to 8.5%. This department store operator’s shares have halved in value in 2020. Investors have been selling its shares after the pandemic impacted its sales materially.
• Inghams Group Ltd (ASX: ING) has 8.2% of its shares held short, which is flat week on week. Short sellers don’t appear to believe the worst is over for the poultry producer after a terrible performance in FY 2020.
• A2 Milk Company Ltd (ASX: A2M) re-enters the top ten with 8.1% of its shares held short. This certainly was great timing by short sellers. The dairy and infant formula company’s shares crashed lower last week after downgrading its guidance for FY 2021.

Finally, I feel it is worth noting that Mesoblast limited (ASX: MSB) shares narrowly missed out on the top ten with short interest of 8%. The biotech company’s shares crashed over 40% lower last week after a series of disappointing updates.

More reading

• ASX 200 Weekly Wrap: ASX hits new post-March high
• Synlait Milk (ASX:SM1) share price on watch after halving guidance due to a2 Milk (ASX:A2M) update
• What’s going on with the Mesoblast (ASX:MSB) share price in 2020?
• These were the worst performing ASX 200 shares last week
• Why did the Synlait (ASX:SM1) share price drop 2% then enter a trading halt today?

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 Avita Medical Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk and Webjet Ltd. The Motley Fool Australia has recommended Avita Medical Limited, Flight Centre Travel Group Limited, and InvoCare 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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Are you looking to invest in some growth shares in 2021? Then you might want to take a look at the ones listed below.

They have been tipped as buys and tipped for big things in the future. Here’s what you need to know:

Altium Limited (ASX: ALU)

The first growth share to look at is Altium. It is a printed circuit board (PCB) design software provider which is aiming to dominate its industry. Management believes it can achieve this thanks to the quality of its software and especially its new cloud-based Altium 365 platform. If it delivers on this, then the future will be very bright for Altium due to the Internet of Things and artificial intelligence booms. These markets are underpinning exceptionally strong demand for electronic design software and are expected to continue growing strongly for a long time to come. Analysts at Morgan Stanley are confident on its future. They have an overweight rating and $40.00 price target on the company’s shares.

Kogan.com Ltd (ASX: KGN)

This ecommerce company has been performing positively in recent years. However, its growth went to the next level this year when the pandemic accelerated the shift to online shopping. This led to significant customer, sales, and earnings growth in FY 2020 and has continued into the new financial year, even after bricks and mortar stores reopened. Kogan also undertook a capital raising earlier this year. But unlike other companies that needed the funds to ride out the storm, these funds were to make acquisitions. Kogan has just acquired Mighty Ape in New Zealand and could have more value accretive options in its sights. Credit Suisse is a fan of Kogan. It recently put an outperform rating and $20.60 price target on its shares.

Pushpay Holdings Group Ltd (ASX: PPH)

A final growth share to look at is Pushpay. It is a leading donor management and community engagement platform provider for the faith sector. Management has plans to win a 50% share of the US medium to large church market in the future, which represents a US$1 billion opportunity. Given that FY 2020’s revenues increased 32% to US$129.8 million, this clearly shows that still has a very long runway for growth over the 2020s. Due to the quality of its platform and last year’s US$87.5 million acquisition of church management system provider Church Community Builder, analysts at Goldman Sachs appear to believe it can achieve this. The broker has a conviction buy rating and ~$2.59 price target on Pushpay’s shares.

More reading

• Got cash to invest? Here are 2 ASX shares to buy
• Top brokers name 3 ASX shares to buy next week
• 3 top ASX shares to buy for 2021
• 4 leading ASX growth shares to buy for 2021
• These are the 7 best ASX retail shares in 2020

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 Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 fantastic ASX growth shares to buy in 2021 appeared first on The Motley Fool Australia.

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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.

What a wild ride it’s been for Big Tech. After decades of Washington applying a relatively soft-touch regulatory approach to the sector’s leaders, there’s been a sharp turn toward much fiercer rhetoric over the last two years. The sentiment that it’s time to rein in those companies is widespread. Big Tech has drawn the ire of congresspeople on both sides of the aisle, and it is increasingly taking heat from officials at the state level as well.

However, one mega-cap tech company has been noticeably absent from the list of those that are earning lawmakers’ ire: Microsoft (NASDAQ: MSFT).

Lawsuits and regulatory pushback

Facebook (NASDAQ: FB) has been the most visible target of governmental scrutiny and pressure of late. President Trump has been aggressive in his efforts to overturn social-media friendly Section 230 of the Communications Decency Act, first by issuing an executive order in May and then threatening to veto the annual National Defense Authorization Act if the provision’s repeal is not included in it.

However, the executive order has been challenged in court on legal and constitutional grounds. Meanwhile, the bill Trump was threatening has passed both houses of Congress with veto-proof majorities.

An antitrust lawsuit originating at the state level with 46 state attorneys general and the FTC challenging Facebook’s earlier acquisitions of Instagram and WhatsApp appears to be the bigger risk to the company at the moment.

Apple‘s (NASDAQ: AAPL) biggest legal challenges relate to its App Store marketplace’s policies. The first is a lawsuit from Fortnite creator Epic Games, which does not want to keep paying Apple a 30% cut of the revenue that the popular title generates through in-app transactions.

More recently, Cydia has sued Apple. Similarly to the Epic suit, it alleges that the iOS App Store model is an illegal monopoly. In a federal court filing, Cydia claims its own (unauthorized) iPhone app store existed before Apple’s, and that due to Apple’s anticompetitive conduct, it has essentially been shut out of the iOS distribution market. 

Amazon is facing a similar marketplace-related class-action lawsuit. Plaintiffs allege it uses its monopoly power to essentially dictate prices on third-party products. Finally, in October, the U.S. Justice Department and 11 state attorneys general filed a lawsuit alleging Alphabet‘s search business constitutes an illegal monopoly. A recent report from The Wall Street Journal suggests there are additional lawsuits in the works against the search giant.

How does this help Microsoft?

There are a few ways that keeping out of the courtroom benefits Microsoft. The first is that legal problems are a bandwidth issue. The more time C-suite occupants spend responding to government inquires and ensuring that their company is complying with injunctions, the less time they have to think about high-level strategy. The second is that court cases carry the possibility of monetary penalties. Ultimately, both of these tend to be minor concerns for the largest tech companies, but they are risks nonetheless.

The biggest risk appears to be that the results of court cases could force changes to some Big Tech business models, most notably on the mergers-and-acquisitions front. The multistate lawsuit against Facebook is interesting in that it seeks to revisit acquisitions that were sealed five or more years ago. While this may portend a more hostile environment toward all acquisitions in tech, Microsoft has been aggressively snapping up businesses recently with no pushback from regulators.

The company spent $9 billion on 20 acquisitions in its fiscal 2019 — though most of that sum went toward its $7.5 billion acquisition of GitHub — and tacked on another dozen acquisitions in its fiscal 2020 (which ended June 30). It’s likely that fiscal 2021’s M&A outlays will exceed 2019’s, as Microsoft announced in September that it was spending $7.5 billion to buy ZeniMax Media.

What should you do if you own these companies?

Investors generally employ one of two approaches when evaluating legal and regulatory risk, and both tend to be overreactions. The first is to quickly sell stocks at the prospect of a legal or regulatory challenge without knowing its full ramifications. The second — which has admittedly been an effective strategy over the last decade — is to haphazardly wave off any concern without applying proper due diligence.

The better long-term approach is to critically evaluate these risks in their proper perspective. Ironically, we can draw from Microsoft’s history for some context about how stronger regulation might impact today’s tech powerhouses. In 2000, a federal judge initially ruled that Microsoft’s tactics in bundling Internet Explorer with its Windows operating system had violated antitrust laws. He ordered the company to be broken up.

On appeal, the breakup order was rescinded. That led the Department of Justice to settle its case in exchange for a host of concessions from Microsoft, including an agreement to share its APIs with third-party developers. Use of the Internet Explorer browser plunged and — for a host of reasons not all related to the legal loss — a “lost decade” followed for Microsoft investors. I don’t expect such an aggressive result for the current targets of governmental ire, but some in Washington are looking to make a statement to Big Tech. Microsoft, though, is clearly out of their crosshairs.

While legal and regulatory risks have been minimal for this sector in recent years, investors now need to be more alert to them when doing their due diligence. Ultimately, your investment decisions should not be dictated by these concerns, but they are definitely worth keeping an eye on.

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

More reading

• How to invest in US shares in 2021
• Facebook is preparing to copy Cameo
• World’s 10 biggest companies are now worth 12% of Earth’s GDP
• Is it time for Facebook to do the unthinkable?
• ACCC hauls Facebook to court for ‘deceptive’ conduct

Jamal Carnette, CFA owns shares of Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Microsoft and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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The Bapcor Ltd (ASX: BAP) share price has steadily grinded higher this year, currently up 20% year to date. While the COVID-19 pandemic and resulting government imposed restrictions in Australia, New Zealand and Thailand had an adverse impact on its financial performance in FY20, the business expects to bounce back strongly in FY21. 

Resilient FY20 performance 

Despite the circumstances, Bapcor delivered a resilient FY20 performance with proforma earnings before interest, taxes, depreciation and amortisation (EBITDA) down 4.1% and proforma net profit after tax 5.5% below the record earnings achieved in FY19. 

Looking ahead, the company believes the fundamentals of the vehicle aftermarket are as strong as ever. COVID-19 has resulted in record sales of second hand vehicles as travellers sought social distancing and moved away from public transport. According to Bapcor, there is also the likely flow-on effect of more people spending their holidays domestically utilising their vehicles. 

FY21 trading update 

Last week, Bapcor provided a pleasing first quarter FY21 trading update in which revenue for the first five months to the end of November was up 26% on the prior corresponding period (pcp).

For the first half of FY21, the company anticipates it will achieve revenue growth of at least 25% over the prior corresponding period. It also expects net profit after tax to increase by at least 50% over the pcp which was $45.6 million. 

In the update, Bapcor also reported that the construction of its new Victorian Distribution Centre is progressing well. The building is expected to be handed over in February 2021, and an automated picking system operational in the following six months. 

This update was well received as the Bapcor share price jumped as high as 10% on the day of the announcement. However, Bapcor shares were unable to hold onto all of the day’s gains and closed just 3% higher. 

Upgraded Bapcor share price after trading update

Citi has raised its Bapcor share price target from $8.80 to $8.85 and retains its buy rating. The broker was pleased with the company’s trading update to the end of November but expects group sales to slow to 23% growth in Q2 compared to 27% in Q1. It rates Bapcor as a top pick in the automotive sector. 

Macquarie Group Ltd (ASX: MQG) has raised its Bapcor price target from $8.50 to $8.75 and retains an outperform rating. It notes strong trading across all business segments and expects solid growth to continue. 

Morgan Stanley has raised its price target for Bapcor from $8.45 to $9.00 with an overweight rating. The broker says that further upgrades may follow as trends in auto spending continue. 

UBS Group retained its buy rating with a price target of $8.55. The broker upgraded its expected FY21 NPAT to $120 million, above Bapcor’s own guidance range. 

Credit Suisse was the only broker to lower its Bapcor share price target from $8.75 to $8.60 despite retaining its outperform rating. Its commentary was also positive, saying sales growth as reported in November was better than expected.  

More reading

• Top brokers name 3 ASX shares to buy next week
• Why Bapcor, Fortescue, Nufarm, & Saracen shares are pushing higher
• 2 ASX growth shares to buy that keep delivering wins
• ASX 200 rises on Thursday
• Citigroup picks the best ASX retail stocks to own for 2021

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor and Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Suncorp Group Ltd (ASX: SUN) share price will be on watch on Monday after the release of an update on its business interruption insurance.

What did Suncorp announce?

This morning Suncorp announced that the Federal Court of Australia made its ruling on Friday in relation to a COVID-19 business interruption insurance claim from a customer in Victoria.

The customer commenced proceedings following the decline of a claim under its business interruption policy for COVID-19 pandemic related losses. A discrete question concerning the proper construction of the exclusion clause was referred to the Federal Court.

The exclusion clause in the particular Suncorp policy excluded cover for “any claim that is directly or indirectly caused by or arises from, or is in consequence of or contributed by highly pathogenic Avian influenza or any biosecurity emergency or human biosecurity emergency declared under the Biosecurity Act 2015 (Cth), its subsequent amendments or successor, irrespective of whether discovered at the premises of the breakout or elsewhere.”

What happened in the Federal Court?

According to the release, the Court’s interpretation is consistent with Suncorp’s position that cover for loss arising from a pandemic is a high risk for an insurer which would normally be excluded.

It found that the exclusion clause will operate where a human biosecurity emergency has been declared to exist, and a business has been shut down by government order as a response to that emergency, whether Federal, State or Local.

The Court also held the exclusion would apply even where the connection between the emergency and the claim was remote and was only a cause of the claim.

In light of this favourable outcome, the insurance giant believes that its overall reserving continues to be adequate.

Though, it notes that valuations do not take into account the potential for further COVID-19 lockdowns, as well as any unexpected outcomes from future litigation including any industry test cases.

Suncorp’s CEO, Steve Johnston, commented: “Suncorp is committed to working with Government, industry and the broader community to explore alternative frameworks to addressing pandemic risks.”

“We recognise these are challenging times for small business and we have put in place a range of measures to support them through this period. Unfortunately, pandemics are an uninsurable risk and premiums have not been paid to cover an event of the scale of COVID-19,” he concluded.

More reading

• The ASX bank with the best dividend yield under APRA’s new guidelines
• Macquarie’s model portfolio of ASX stocks to hold in the post-COVID recovery

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 S&P/ASX 200 Index (ASX: XJO) has done it again, banking yet another week in the green to turn its 6-week winning streak into 7. The gains also helped the ASX 200 hit its highest level since the March share market crash. All of this was despite a nasty fall on Friday as the extent of the Sydney coronavirus cluster became clear.

So, it was a rather dramatic week on the share market last week. Friday saw the ASX 200 hit 6,756.7 points upon market open, a new post-March high watermark for the index. At that level, the ASX 200 was up 1% year to date, and up almost 47% since the March lows.

But that wasn’t the only high we saw last week. We also saw the Aussie dollar climb to a new 2½-year level last week when it reached as high as 76.4 US cents on Thursday night. Additionally, the cryptocurrency bitcoin also broke its all-time high, that was set back in 2017, last week. Highs all round, it seems.

Lockdowns and crushed dreams

In other news, we had some blockbuster moves on the markets last week. Perhaps most spectacular was the A2 Milk Company Ltd (ASX: A2M), shares in which plunged 23.64% on Friday to close the week at just $10.14 a share. The A2 Milk share price fell as low as $9.82 during the trading day as well. You have to go back to 2018 to find the last time A2 hit those levels (and that includes the March crash). The catalyst? An announcement the company released to the markets which updated A2’s guidance for FY2021. Apparently, the company has experienced a more severe than expected disruption in its ‘daigou’ product channels than previously anticipated.

We also had another dramatic move for Mesoblast Limited (ASX: MSB), shares of which crashed a colossal 36.07% on Friday. It was a disappointing update from its remestemcel-L product trial for treating COVID-19 that set investors off on that one. Unlike A2 though, as of Friday the Mesoblast share price is still well above its 52-week low of $1.02 we saw back in March.

ASX bank investors, however, were cheering last week. On Tuesday it was announced that the financial regulator APRA would be removing the cap on banks’ dividend payout ratios, which was previously restricted to 50% of earnings. That means the ASX banks should be able to increase their dividend payments in 2021 if all goes well.

Finally, it’s worth mentioning that the coronavirus news out of Sydney on Friday hit cyclical shares hard, especially (and somewhat predictably) those in the travel sector. Qantas Airways Limited (ASX: QAN) shares were down 3.53% on Friday, whilst Sydney Airport Holdings Pty Ltd (ASX: SYD) shares were hit 2.88%.

How did the markets end the week?

The ASX 200 had a bumpy, but overall positive week last week. Monday saw a healthy 0.6% gain, whilst Tuesday saw that reversed with a 0.8% loss. Wednesday turned back to the green with another 0.9% gain, backed up on Thursday with another 1% on top. Friday saw a nasty drop of 1.2%, but it wasn’t enough to stop the ASX 200 making it 7 for 7. Since the index started the week at 6,642.6 points and finished up at 6,675.5 points, it ended up being a week-to-week gain of 0.5% overall.

Meanwhile, the All Ordinaries Index (ASX: XAO) started the week at 6,886.4 points and finished up at 6,924.1 points for a week-to-week gain of 0.55%.

Which ASX 200 shares were the biggest winners and losers?

Time now for some Foolish hot coffee whilst we salaciously dissect last week’s biggest winners and losers. As always, we’ll start with the worst-performing ASX 200 shares:

More reading

• Synlait Milk (ASX:SM1) share price on watch after halving guidance due to a2 Milk (ASX:A2M) update
• 2 top ASX dividend shares to buy today
• 5 things to watch on the ASX 200 on Monday
• Buy these ASX blue chip shares for your retirement portfolio
• 2 ASX dividend shares with 4%+ yields

Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and CSL Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk, Macquarie Group Limited, and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Avita Medical Limited, EML Payments, MEGAPORT FPO, and Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ASX 200 Weekly Wrap: ASX hits new post-March high appeared first on The Motley Fool Australia.

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The Synlait Milk Ltd (ASX: SM1) share price will be on watch today after it released an update on its guidance.

This follows a disappointing update by its largest customer, A2 Milk Company Ltd (ASX: A2M), on Friday.

That update revealed that A2 Milk Company has experienced a more significant and protracted disruption in the daigou channel than expected. As a result, it downgraded its sales and earnings guidance materially for FY 2021.

What did Synlait announce?

This morning the dairy processor updated its FY 2021 guidance to reflect a revised demand forecast received from the infant formula company following its guidance update.

According to the release, the updated forecast from a2 Milk Company has resulted in Synlait forecasting total consumer-packaged infant formula volumes to be approximately 35% lower than FY 2020.

As a result of this change, based on initial estimates and currently available information, management expects its FY 2021 net profit after tax to be approximately half that of its FY 2020 profit result.

The company intends to provide investors with a further update on its FY 2021 profit expectations with its half year results in March.

What now?

The dairy processor’s board and management team revealed that they are continuing to actively pursue opportunities to mitigate the impact of this development. This includes focusing on the execution of its diversification strategy, asset optimisation, and prudently managing costs.

It also advised that there has been no disruption to manufacturing or demand for Synlait’s ingredient, lactoferrin, or consumer-goods businesses, and remains confident that it can deliver on its medium to long term objectives.

However, the company warned that its guidance remains subject to the ongoing effects of COVID-19, with consumer behaviour, channel dynamics, and supply chain disruptions all subject to change.

More reading

• These were the worst performing ASX 200 shares last week
• Why did the Synlait (ASX:SM1) share price drop 2% then enter a trading halt today?
• ASX 200 falls 1.2% on Friday
• Why the a2 Milk Company (ASX:A2M) share price crashed 26% lower today
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Synlait Milk (ASX:SM1) share price on watch after halving guidance due to a2 Milk (ASX:A2M) update appeared first on The Motley Fool Australia.

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Do you have some cash to invest? ASX shares might be the way to go.

There are plenty of businesses to look at on the stock exchange, these are two that could be worth a look:

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic payments business which facilitates donations from people to charitable organisations, particularly large and medium churches in the US. For those churches, it offers a livestreaming service to connect with the congregation even during this period of COVID-19 and social distancing.

One fan of Pushpay is fund manager Ben Griffiths from Eley Griffiths who said: “Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX:IRE). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

The ASX share believes that it can continue to deliver significant operating leverage as revenue grows whilst keeping costs under control. In the FY21 interim result it increased its gross profit margin from 65% to 68% and the earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin went up from 17% to 31%.

Pushpay is aiming for US$1 billion of annual revenue over the long term, it made US$85.6 million of operating revenue in the FY21 interim result, which indicates that there is room for more growth.

In FY21 it’s expecting to more than double its EBITDAF to a range of US$54 million to US$58 million.

At the current Pushpay share price it’s valued at 25x FY23’s estimated earnings.

Pacific Current Group Ltd (ASX: PAC)

Pacific Current is an ASX share that invests into fund managers. Nearly all of its approximately 15 investments are based overseas, with a majority based in the US.

One key fund manager within its portfolio is GQG which has five long-only investment strategies: US shares, global shares, concentrated global shares, international shares and emerging markets shares.

GQG’s strategies have beaten their benchmarks over the longer-term, this is growing and attracting new funds under management (FUM).

In FY20 Pacific Current grew FUM by 62% from AU$57 billion to AU$93 billion, with GQG being the biggest contributor to growth.

In the quarterly update for the three months to 30 September 2020, FUM grew by 14% to AU$106.4 million. Again, the vast majority of the growth during the period came from GQG.

At its annual general meeting, Pacific Current said that its pipeline of attractive investments is strong, with the company expecting to make at least two investments in FY21. It also said it’s expecting an acceleration of new commitments to its investments over the next 18 months.

Pacific Current also said that it’s exploring new revenue sources because it has the ability to deploy far more capital than it can access, so it’s considering raising a private fund to invest alongside Pacific Current. In that arrangement, the company would receive management fee revenue from the fund and co-investment rights.

In FY20 it grew its underlying earnings per share (EPS) by 18% to 51 cents and the dividend increased by 40% to $0.35 per share.

At the current Pacific Current share price it offers a grossed-up dividend yield of 8.3% and it’s valued at 9x FY23’s estimated earnings.

More reading

• 3 top ASX shares to buy for 2021
• 4 leading ASX growth shares to buy for 2021
• Why Mesoblast, Pilbara Minerals, Pushpay, & Retail Food Group shares are dropping lower
• Why the Pushpay (ASX:PPH) share price is tumbling lower today
• 3 exciting ASX tech shares to buy in 2021

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

The post Got cash to invest? Here are 2 ASX shares to buy appeared first on The Motley Fool Australia.

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