Tag: Motley Fool

Magnis Energy Technologies Ltd (ASX: MNS) shares are today charging higher as the company saw major success in its battery fast charging program. At the time of writing, the Magnis share price is up 5.26% to 20 cents after moving as high as 21 cents in intraday trading.

What does Magnis do?

Magnis Energy, formerly Magnis Resources, is an Australian-based company focused on lithium-ion battery manufacturing in Australia and the United States. The company also has an interest in pre-mine development of its Nachu Graphite project in Tanzania.

This activity is supplemented by involvement in the development and ultimately mining of natural flake graphite for use in various industries. Including, in particular, batteries for storing electrical energy.

What was announced?

The Magnis share price has shot up as the company announced it has had major success in its extra fast charging (EFC) battery program. The company will now advance to testing for optimised commercial cells.

Cycling results from the unoptimised cell, using C4V technology, produced very exciting results. For the batteries, over 1000 charges were conducted, with capacity maintaining strength above 80%. The EFC allows 85% charge in just six minutes. It is because of the exceptional results that Magnis has decided to commence testing of EFC on optimised cells.

Furthermore, a demonstration program in New York has commenced for a public transit technology and innovation program. The technology is planned to be developed in Binghamton, with testing taking place at BAE Systems before being installed on some New York City bus routes. The plan of the project is to remove 500,000 metric tonnes of carbon dioxide annually from the New York City metro area, whilst also increasing energy efficiency and lowering upfront costs.

Commenting on the update, Magnis Chairman, Frank Poullas, said, “The response from our fast charging announcement has been amazing with a number of major original equipment manufacturers contacting Magnis with discussions having kicked off.”

Foolish takeaway

Back in early 2018, Magnis was one of the most tipped small caps by Australian fund managers. Unfortunately for shareholders, the Magnis share price has failed to live up to the hype as it has slumped 58% since 2018. However, recently the company has seen a strong turnaround with the Magnis share price gaining 300% since its March lows.

More reading

• Suncorp cuts 550 jobs
• The latest ASX stocks upgraded by brokers to “buy” today
• Why the Eagers (ASX:APE) share price could boom post-pandemic
• Why the Afterpay (ASX:APT) and Sezzle (ASX:SZL) share prices are falling again today
• A definitive guide to September ASX share trends

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The market is poised to end the week on a backfoot. But the pullback is giving brokers the opportunity to upgrade some ASX stocks to “buy”.

The S&P/ASX 200 Index (Index:^AXJO) slumped 0.7% in after lunch trade and will finish the week with a 1% loss if it closes at current levels.

While experts are divided on whether the burst in volatility marks the start of a highly anticipated market correction, top brokers are seeing value in two stocks.

Floating to the top

The Santos Ltd (ASX: STO) share price is one with UBS upgrading its recommendation on the stock to “buy” from “neutral”.

The news isn’t helping the stock today though as the slump in the overnight oil price dragged on the sector.

But Santos can still be a profitable play even as the Brent crude price dropped under US$40 a barrel. UBS believes management can achieve its target of being free cash flow (FCF) breakeven at under US$25 a barrel this calendar year.

This will help Santos lower gearing to 27% from 34% by FY22 – just in time for its next major growth phase.

Underappreciated assets

But this isn’t the only reason to buy the stock. The broker believes the market is underappreciating a number of its assets.

The 1.7 million tonnes a year (mtpa) Moomba Carbon Capture and Storage (CCS) project is one. Moomba could benefit Santos in two ways.

“We anticipate [the] federal govenment will likely legislate a process for CCS to be eligible for Australian Carbon Credit Units (ACCUs) offsetting >50% of the lifecycle cost,” said UBS.

“Our analysis expects that reinjecting 1.7mtpa of CO2 into depleted Cooper basin reservoirs could lift oil production by 2.7mmbbl pa.”

The broker’s price target on Santos is $6.50 a share.

Spoonful of sugar

Meanwhile, Credit Suisse upped its rating today on the Sigma Healthcare Ltd (ASX: SIG) share price to “outperform” from “neutral”.

The broker turned bullish on the drug supplier and pharmacy retail chain as it believes the stock is cheap and can deliver double-digit earnings growth.

“We forecast SIG achieving EBITDA CAGR of 21% between FY20-FY23F driven by cost outs, full ramp-up of Chemist Warehouse FMCG contract and continued above market growth in retail,” said Credit Suisse.

“The stock trades on 17x 12-mth forward CS EPS, below its two- and 5-year averages.”

Cash conversion set to improve

Sigma reported its first half results this week, which was inline with the broker’s expectations, although its cash conversion of 49% may have disappointed investors.

But Credit Suisse believes this will improve once the volatility from the COVID-19 impact subsides.

The broker’s 12-month price target on the stock is $0.70 a share.

More reading

• Afterpay (ASX:APT) share price facing new competitive pressure
• What I’ve learned writing for The Motley Fool
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• IGO share price surges on potential sale of Tropicana
• Up 9.2% in 1 day, is the Clinuvel Pharmaceuticals (ASX:CUV) share price a buy?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Eagers Automotive Ltd (ASX: APE) share price could be poised to boom post-pandemic.

Confidence in Australia’s future economic growth remain negative as the country enters its first recession in nearly 30 years.

Despite the doom and gloom, Eagers Automotive (which changed its name from AP Eagers Ltd last month) could benefit post-pandemic.

Why Eagers could boom post-pandemic

There is no doubt that the COVID-19 pandemic has changed the way we go about our daily lives. Although some of these changes may be temporary, there are certain habits that will remain permanent.

Automotive companies like Eagers could benefit as a result of some behaviour changes.

Firstly, a changing attitude to public transport could see a surge in demand for new vehicles. With social distancing measures and personal preferences pushing consumers to avoid public transport and drive to work instead.

In addition, domestic and international border closures could see demand for air travel trickle to the automotive sector. Instead of flying interstate or overseas, consumers may opt to do a roadtrip for their next holiday.   

How has the company performed thus far?

The Eagers Automotive share price has recovered quite remarkably after being sold-off earlier this year.

Shares in the company have bounced more than 205% from the low in late March.

In late April, Eagers informed shareholders that its dealerships would remain operational during the lockdown period. In addition, management reported that the pandemic had allowed the company to reduce its cost base and reshape its operations.

Eagers was also able to secure $122 million in working capital during the pandemic. This has put the company in a strong position to buy smaller, distressed dealerships.  

The company released its financial report for the first half of FY20 in late August. The report headlined a 102% increase in revenue of $4.15 billion and 81% increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) of $188.1 million. Car retailing sales were the main driver of revenue growth, with truck sales also aiding the bottom line.  

Should you invest?

Eagers is Australia’s oldest listed automotive retail group, operating dealerships across the country. 

The company has a dominant position in Australia’s automotive market and is in strong financial position. Eagers has been around for more than 100 years which also shows great longevity.

However, the automotive industry is evolving, and conditions remain bleak. The discretionary nature of motor vehicles is also prone to lower consumer spending.

In my opinion, the hypothesis of changed consumer behaviour post-pandemic is interesting. However, the proof needs to be in the pudding. I would probably pay attention to new car sales figures before investing in the Eagers share price.

More reading

• Suncorp cuts 550 jobs
• Magnis (ASX:MNS) share price charges 5% higher
• The latest ASX stocks upgraded by brokers to “buy” today
• Why the Afterpay (ASX:APT) and Sezzle (ASX:SZL) share prices are falling again today
• A definitive guide to September ASX share trends

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Sezzle Inc (ASX: SZL) share price is falling hard again today, down nearly 7% in early afternoon trading. The Sezzle share price reached an all-time high on 28 August of $11.34 per share. That handed Sezzle shareholders a 583% gain since the opening bell on 2 January.

Since that high, the Sezzle share price has fallen sharply, down more than 46%. That still leaves Sezzle’s share price up 268% in 2020. But clearly investors are beginning to have doubts about its current valuation.

Sezzle isn’t the only company in the buy now, pay later (BNPL) space that’s been falling. Most every ASX listed BNPL share has lost ground over the past two weeks. That includes the dominant Aussie BNPL player, Afterpay Ltd (ASX: APT).

The Afterpay share price is down nearly 1% in intraday trading.

Afterpay hit its own all-time high of $92.48 per share on 25 August. Since that high, Afterpay’s share price is down 19%. The Afterpay share price is also still well-up for the year, however, with a gain of 144.5% since 2 January.

But as with Sezzle, more investors appear to be taking profits off the table than buying into the dip.

Why are the Sezzle and Afterpay share prices sinking?

Both the Sezzle and Afterpay share prices are partly subject to wider selling today, with the All Ordinaries Index (ASX: XAO) down 0.6% at time of writing. And technology shares are falling slightly harder, with the S&P/ASX All Technology Index (ASX: XTX) down 0.97%.

But both Sezzle and Afterpay are down more.

One of the prime drives appears to be the dawning realisation that the moats — or barriers to entry — in the BNPL space are easily breached by new entrants with deep pockets.

Those include United States payments giant Paypal Holdings Inc (NASDAQ: PYPL), which announced it is launching its own BNPL platform ‘pay-in-4’. National Australia Bank Ltd. (ASX: NAB) has also announced it’s launching an interest-free credit card that allows customers to repay their purchases in instalments for a fixed monthly fee.

Addressing Afterpay’s current situation, David Pace, co-manager of the Greencape Capital High Conviction Fund said (as quoted by the Australian Financial Review):

We can’t find value in Afterpay. Now that it’s a larger index position, we see that as opportunity to earn alpha by not owning it over the medium to long term. It’s always about benchmarking but from a bottom-up perspective we don’t think that the barriers are high enough for Afterpay and we don’t think the earnings are sustainable enough.

Indeed, as government stimulus begins to unwind, we’re unlikely to see a repeat of the consumer spending splash on big ticket retail items. That translates to less demand for BNPL services, which could put further downward pressure on the Afterpay and Sezzle share prices.

More reading

• Could these exciting small cap tech shares be the next Afterpay (ASX:APT) and Altium (ASX:ALU)?
• Afterpay (ASX:APT) share price facing new competitive pressure
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• Why Afterpay (ASX:APT) and Domino’s (ASX:DMP) are smashing the market in 2020
• This ASX tech share is still cheap to buy

Bernd Struben 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 PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors carve buying patterns into even the most turbulent of markets. In fact, it is arguably easier to pick up ASX share trends when markets are choppy. So far this month we have seen market highs, collapses in confidence, rapid snapbacks and a whole range of other events. Here are some of the trends that have stood out to me for the rest of September.

Iron ore is up, LNG is down

This has been the story for a few months now. However, it is becoming more entrenched each week. 

Iron ore has risen by 57.2% in USD since the market low point on 23 March. To illustrate further, the Pilbara mining ASX shares have billions of dollars in future spending under way to capitalise on sustained high demand. Meanwhile, China became a net importer of steel in June for the first time in 11 years. Lastly, the feared competition from Simandou is clearly not going to have an industry-destroying impact.

The best ASX share in iron ore, for me, is Fortescue Metals Group Limited (ASX: FMG). I believe this company will deliver both share price growth and consistent dividends. 

The oil price is under threat yet again. A combination of high stockpile builds, Saudi Arabia cutting oil prices, and low international demand is impacting all energy prices. This is a permanent shift I believe in an industry that is in long-term terminal decline. For me, the best option to take advantage of this market is Origin Energy Ltd (ASX: ORG). Origin does have a significant stake in Asia Pacific LNG, however it is also Australia’s largest gas retailer. 

Finance is changing (again)

The buy now, pay later (BNPL) ASX shares have been on a slide since 18 August. When the market fell over on Tuesday, the BNPL sector was one of the hardest hit. When it rose again yesterday the BNPL shares were either flat or falling. This can be traced back to the entry of Paypal Holdings Inc (NASDAQ: PYPL) into the market. However, Commonwealth Bank of Australia (ASX: CBA) is already there with Klarna, and it is clear now that there is little barrier to entry.

To paraphrase Paul Keating, every pet shop gala will soon have their own BNPL company. However, there are other beneficiaries in the finance sector. I am keeping an eye on Tyro Payments Ltd (ASX: TYR) as well as CML Group Ltd (ASX: CGR). I have favoured the latter for a long time. 

Growth investors favour innovative ASX shares

As the heat is coming out of the BNPL sector, others are starting to see share prices inflate. In particular I have noticed this in ASX shares for non-software innovation. For example, artificial intelligence company Brainchip Holdings Ltd (ASX: BRN) has seen its share price rise by 264% in the past month. BrainChip is developing a new form of artificial intelligence which has moved into proof of concept partnerships.

Another strong performing innovation ASX share is DroneShield Ltd (ASX: DRO). This is an innovative company developing non-ballistic drone sensing and disrupting technologies. Droneshield has announced a number of new contracts in the past couple of weeks and has seen its share price rise by 55% in the past month.

Foolish Takeaway

These are some of the stronger trends that are likely to carry ASX shares through to the end of September. As always, I believe they provide strong investing opportunities.

For instance, while prices are still reasonable it is a good time to stock up on iron ore shares as a long-term hold. If you are waiting for LNG companies to rise back to previous levels then either cut your losses or don’t look at them for two to three years. Moreover, I think it is time to take profits on BNPL and to redeploy growth investing funds into companies delivering offline innovation. Particularly those with a high level of momentum. 

More reading

• Why the DroneShield (ASX:DRO) share price is up even higher today
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower
• 2 ASX shares I would buy again and one I regret
• This ASX tech share is still cheap to buy
• Why the Rio Tinto share price is outperforming its peers

Daryl Mather owns shares of DroneShield Ltd and Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended PayPal Holdings. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The DroneShield Ltd (ASX: DRO) share price has been on fire today, after another new contract announcement. It shot up 14% higher to 23.5 cents before dropping in mid-afternoon trade to 21 cents. This week alone, the DroneShield share price has increased 42% on the back of two positive announcements.

Here’s why the DroneShield share price is up again today.

About DroneShield

DroneShield is a global leader in drone security technology. The company designs and develops detection systems that use specialised technology to protect people, organisations and critical infrastructure from drones.

Its multi-layered drone countermeasures include detection and disruption products which are much needed in the current environment.

DroneShield awarded new defence contract

DroneShield has received an order from a southeast Asian country for its DroneSentry system. The $1 million contract includes a complete DroneSentry solution comprising sensors, radars, electronic warfare, electro-optics systems, ID and tracking.

This is DroneShield’s first order from the southeast Asian country. It anticipates that further sales will lead to a multi-million earnings. The customer is expected to receive delivery in 4Q 2020.

DroneShield CEO Oleg Vornik said momentum in customers adopting its products was growing. This was underpinned by recent sales to European countries, and a new contract with the United States Defence Department.

Mr Vornik added that DroneShield was starting to see its extensive pipeline converting into end-user orders.

The sale is however subject to pending relevant export approvals.

Other recent updates

Yesterday, DroneShield advised it had received funding from the US Department of Defence for its DroneShield Complete Command-and-Control (C2) system. The DroneShield Complete provides real-time alerting, tracking and reporting information for users.

The targeted development will work on a list of enhancements expected to lead to multiple purchases of DroneShield’s counter drone equipment. The company noted that the project will span several months.

How has the DroneShield share price performed?

The DroneShield share price has jumped 65% in the past month, but fallen 29% from a trailing 12 months. At a market capitalisation of $67 million, the company is still relatively small compared to some of its peers like Electro Optic Systems Hldg Ltd (ASX: EOS).

The DroneShield share price did reach a 52-week high of 46.5 cents, before pulling back late last year.

More reading

• A definitive guide to September ASX share trends
• Why the DroneShield (ASX:DRO), BrainChip (ASX:BRN) and Recce (ASX:RCE) share prices are rising today
• Electro Optic (ASX:EOS) share price up on resumed contract
• DroneShield (ASX:DRO) share price has rocketed today
• Electro Optic (ASX:EOS) share price shoots higher on new product release

Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It wasn’t that long ago that tech stars Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU) were classed as small cap shares and flying under the radar of most investors.

Today they are multi-billion-dollar companies and can be found in countless portfolios across the country.

But even more importantly, those investors that got in early are sitting on some incredible gains.

I believe this demonstrates why having a little exposure to the small side of the market can be a good thing for a portfolio.

With that in mind, I have picked out three small cap ASX tech shares which I feel have the potential to become much larger in the future. Here they are:

ELMO Software Ltd (ASX: ELO)

ELMO is a $435 million cloud-based human resources and payroll software company providing a unified platform to streamline processes. These include employee administration, recruitment, on-boarding, remuneration, and payroll. Management estimates it has a $2.4 billion opportunity in the ANZ market and a $6.8 billion opportunity in the UK market. The company also has $140 million on its balance sheet to use for acquisitions.

Nitro Software Ltd (ASX: NTO)

Nitro Software is a $430 million software company aiming to drive digital transformation in organisations around the world across multiple industries. Nitro’s core product offering is the Nitro Productivity Suite. It provides integrated PDF productivity and electronic signature tools to customers through a horizontal, software-as-a-service, and desktop-based software solution.

Whispir Ltd (ASX: WSP)

A final small cap share to watch is Whispir. It is a $390 million software-as-a-service communications workflow platform provider. Whispir provides an industry-leading software platform that allows governments and organisations to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. I believe it could be a big winner from the rise of remote working. 

More reading

• Afterpay (ASX:APT) share price facing new competitive pressure
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• Should you buy these beaten down ASX 200 shares?
• Why Afterpay (ASX:APT) and Domino’s (ASX:DMP) are smashing the market in 2020
• This ASX tech share is still cheap 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 and recommends Altium, Elmo Software, and Whispir Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Elmo Software, Nitro Software Limited, and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Before 2020, there was nothing too extraordinary about an ASX dividend share offering a yield of 4% or higher. You could easily go to the big four ASX banks and bag yourself a 5% to 6% yield for a start. And plenty of other dividend shares offered yields in this ballpark as well.

Yet 2020 has changed that paradigm, perhaps irrevocably. The big four are now offering yields ranging from not-a whole-lot to nothing. Scores of other former dividend heavyweights have slashed and cancelled dividends in 2020 so far. These include Transurban Group (ASX: TCL), Qantas Airways Limited (ASX: QAN) and Ramsay Health Care Limited (ASX: RHC), among others.

So in September 2020, a solid 4% yielder is starting to look pretty dang good. Especially if you consider that interest rates remain at virtually zero. So here are 2 ASX shares offering just that!

2 ASX shares with yields over 4%

1) JB Hi-Fi Ltd (ASX: JBH)

JB Hi-Fi has been one of the surprise performers of 2020. Along with many other ASX retail shares, JB was heavily sold off in the March market crash. But the company’s astonishing FY2020 earnings report, in which JB reported a 33% surge in profits, quickly made investors reassess this case. Since 23 March, The JB Hi-Fi share price is up nearly 100%.

But JB is also an underappreciated dividend share as well, in my view. Its FY20 earnings report also included a 76% rise in the company’s final dividend over FY19’s payout. JB now offers a trailing yield of $1.89, which translates into a 4.02% yield today. If we include JB’s full franking, this grosses-up to 5.74%. Not a bad deal in the current environment!

2) WAM Global Ltd (ASX: WGB)

WAM Global is one of my favourite ASX dividend growth shares. This listed investment company (LIC) only started life in 2018. But since then, it has already hit the ground running with its dividends, which have rapidly increased from 2 to 3 to 4 cents per share over the past two years. If we take the last two payouts of 4 and 3 cents per share respectively, we arrive at a trailing dividend yield of 3.33%. WAM Global also provides full franking, so including that the company offers a grossed-up yield of 4.76%.

This LIC invests in a portfolio of global shares. It tends to focus on what it perceives as ‘undervalued growth shares’. As of 31 August, some of the holdings in its portfolio include Microsoft Corporation (NASDAQ: MSFT), Hasbro, Inc. (NASDAQ: HAS) and Electronic Arts Inc. (NASDAQ: EA).

If WAM Global can continue to grow its dividend at anywhere near the rate it has managed over the past two years, I think it will be a dividend powerhouse in no time at all. And given the  company has a profit reserve of 32.9 cents per share (as of 31 August), I’m confident it will do so.

More reading

• Where to invest your JB Hi-Fi (ASX:JBH) dividends today
• 5 things to watch on the ASX 200 on Friday
• ‘We could be heading for a lot of pain’
• ASX 200 rises 1%, CSL (ASX:CSL) leads the way
• Top ASX growth shares to buy in September 2020

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Ramsay Health Care Limited and WAMGLOBAL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Nearmap Ltd (ASX: NEA) share price is the worst performer on the S&P/ASX 200 Index (ASX: XJO) by some distance on Friday.

In afternoon trade the aerial imagery technology and location data company’s shares are down 14% to $2.47.

Why is the Nearmap share price crashing lower?

Investors have been selling Nearmap’s shares on Friday after it announced the successful completion of its fully underwritten institutional placement.

Nearmap raised $72.1 million at a 4.2% discount of $2.77 and will now seek to raise a further $20 million via a share purchase plan.

Why is it raising funds?

Management advised that it launched the capital raising so that it can capitalise on the momentum of the business and the tailwinds in the industry.

It has identified a number of areas of investment. These include scaling its investment in sales and marketing, accelerating the roll out of the HyperCamera3 systems, and expanding its product solutions to high-value use cases.

Why have its shares fallen so hard?

Given that Nearmap’s capital raising was undertaken at a 4.2% discount, investors may be wondering why its shares have fallen a further 10% on top of this.

I suspect this decline could be the result of a broker note out of Goldman Sachs this morning. According to the note, the broker has downgraded its shares to neutral rating with a $2.95 price target.

Goldman commented: “While we remain attracted to the long-term potential of NEA (technology leadership, large market opportunity) and this capital raising should offer NEA a strong margin for safety (we forecast its Net Cash position to trough at A$81mn in FY22E), strong operating leverage is unlikely to be in evidence until FY23E. In order to return to a more positive stance, we would need to see ACV growth trending materially above our forecasts and driving stronger operating leverage than we currently assume.”

While I agree with Goldman Sachs on the above, I think the pullback in its share price today has created a buying opportunity. In light of this, I feel it could be a great buy and hold option at the current level.

More reading

• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower
• Nearmap (ASX:NEA) share price tumbles 11% following capital raising
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.5%, gold miners glitter

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 Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Lithium Australia NL (ASX: LIT) share price has edged lower today despite the the company announcing it has strengthened IP protection for its battery recycling process.  At the time of writing, the Lithium Australia share price has edged 1.85% lower to 5.3 cents.

What does Lithium Australia do?

Lithium Australia, formerly known as Cobre Montana, is a developer of disruptive lithium extraction technologies. It has strategic alliances with a number of companies, potentially providing access to a diversified lithium mineral inventory.

Lithium Australia strives for energy-efficient recovery of lithium from mine waste to create primary battery chemicals. It aims to convert primary battery chemicals into cathode materials through recycling of energy metals from spent lithium-ion batteries (LIB) and alkaline batteries.

Lithium waste is growing at an exponential rate and there is an ever increasing shift towards the use of electric vehicles around the world. Lithium Australia aims to capitalise on these trends and may also see some upside from the recycling of other battery components, such as nickel, cobalt and manganese. Shareholders will be hoping the Lithium Australia share price can hitch a ride on Europe’s lithium bandwagon.

What did the company announce?

The Lithium Australia share price is flat today despite the company advising it has filed two provisional patent cooperation treaty applications relating to the recycling of battery materials, specifically with regard to lithium-ion batteries (LIBs). The first application involves the recovery of electrode materials and electrolyte from spent LIBs. The second involves the selective separation of mixed metal sulphates.

These processes are ideal for the efficient recycling of end-of-life electric vehicle batteries in that they generate high value chemicals for return to the circular battery economy.

Lithium Australia MD, Adrian Griffin, was pleased as he announced:

Lithium Australia, through its recycling subsidiary Envirostream Australia Pty Ltd, is a leader in the field of battery recycling technologies. With our recent successful capital raising, we’re in a strong position to accelerate commercialisation of the technologies discussed here. Indeed, the first of those has already been implemented on a commercial scale at our Melbourne processing plant.

Foolish takeaway

While the majority of hype regarding electric vehicles and batteries has been surrounding companies such as Tesla Inc (NASDAQ: TSLA), Nikola Corporation (NASDAQ: NKLA) and, closer to home, Novonix Ltd (ASX: NVX), Lithium Australia provides an alternate entry point. Nonetheless, shareholders have been left wanting with the Lithium Australia share price experiencing a 12% decline so far this year. 

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Daniel Ewing owns shares of Nikola. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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