Tag: Motley Fool

The S&P/ASX 200 Index (ASX: XJO) fell by around 1.8% to 5,953 points.

Here are some of the highlights from today’s ASX trading:

Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) hit by Paypal

The share prices of Afterpay and Zip fell by 8% and 12.8% respectively today. Shareholders sold them off after payments giant Paypal announced a product called ‘Pay in 4’. As you may be able to guess, it’s an instalment option for consumers.

It provides an interest-free option for people to pay for things with a value of between $30 and $600.

The new service is included in the merchant’s existing Paypal pricing, meaning merchants won’t need to pay any additional fees to enable it for their customers.

PayPal’s SVP of Global Credit, Doug Bland, said: “In today’s challenging retail and economic environment, merchants are looking for trusted ways to help drive average order values and conversion, without taking on additional costs. At the same time, consumers are looking for more flexible and responsible ways to pay, especially online.

“With Pay in 4, we’re building on our history as the originator in the buy now, pay later space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop while providing merchants with a tool that helps drive sales, loyalty and customer choice.”

Afterpay was the worst performer in the ASX 200. But there were also heavy falls for other buy now, pay later providers. The Sezzle Inc (ASX: SZL) share price fell 14.7%, the Splitit Ltd (ASX: SPT) share price dropped 7.25% and the FlexiGroup Limited (ASX: FXL) share price declined 6.2%.

Zip finalises its acquisition

Zip announced it has completed its acquisition of QuadPay yesterday. It also issued $200 million of convertible notes and warrants today.

Zip recently released a trading update for QuadPay which included launching partnerships with Fiserv and MasterCard Vyze as well as retailers like Fanatics and Mercari.

Larry Diamond, CEO and co-founder of Zip, said: “We are thrilled to welcome QuadPay to the Zip family. The US is a critical part of our global strategy as merchants increasingly demand global payment solutions. The QuadPay business has continued to deliver strong results, driven by the flight to online and a move away from the outdated and unfair credit card. We are already working closely with the QuadPay team and expect to drive significant synergies as we come together to capitalise on the global opportunity. We are also delighted to welcome Susquehanna Investment Group onto the register and thank them for their support as we turbocharge our growth into new products and geographies.”

QBE Insurance Group Ltd (ASX: QBE)

Another of the biggest drops in the ASX 200 today was QBE. The QBE share price fell 6.3% after it announced the departure of its CEO, Pat Regan.

Mr Regan is leaving after three years in the role. This came after the outcome of an external investigation about workplace communications that the board concluded did not meet the standards of the company.

QBE chair Mike Wilkins said: “We are committed to having a respectively and inclusive environment for everyone at QBE. The Board concluded that he had exercised poor judgement in this regard.

“While these are challenging circumstances the Board recognises and thanks Mr Regan for his hard work and contribution to strengthening QBE. However, all employees must be held to the same standards.”

Mr Wilkins will assume the role of executive chair, taking on the day-to-day oversight of QBE. A search for a new CEO is underway.

The executive chair said that the fundamentals of QBE are strong and it continues to invest in its data and digital capabilities. He also said that the external pricing environment has greatly improved for QBE.

More reading

• The Cleanaway share price soared 22% in August. Time to buy?
• 3 ASX blue-chip shares I would buy at today’s prices
• What you need to know about the RBA’s rate decision today
• How the rising Aussie dollar could drive the Carsales share price to new all-time highs
• Revealed: Risk-reward myth shattered

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Oil Search Limited (ASX: OSH) share price hasn’t been a shining star this year, to say the least. Like most energy shares, the Oil Search share price was hit particularly hard by the wider COVID-19 panic selling that gripped the markets earlier this year.

Already feeling pressure from falling oil and gas prices, Oil Search shares plummeted 76% from 15 January through to 23 March. The Oil Search share price has, however, rebounded strongly since then, in fact gaining 76% from its March low.

But it takes a lot more than a 76% gain to offset a 76% loss, which leaves Oil Search’s share price down 58% from its 15 January highs and down 54% year to date.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is down 11% over that same time.

What does Oil Search do?

Oil Search was established in Papua New Guinea in 1929 and began trading on the ASX in 1999. The company operates all of PNG’s oil fields. It owns 29% of the ExxonMobil-operated PNG LNG Project, a major exporter to Asian markets. The company also holds interests in the Elk-Antelope and P’nyang gas fields.

Oil Search counts some of the most successful oil and gas operators in the world as its joint venture partners. With PNG’s world class fossil fuel assets, the company is well-positioned to expand its LNG capacity.

Why could the Oil Search share price be in for big gains?

The Oil Search share price has been pushed sharply lower due to two related factors. First, the world has been producing oil, and to a lesser extent LNG, at a record pace. Second, the demand side for oil and gas collapsed following the coronavirus global lockdowns, which saw air and passenger vehicle travel virtually grind to a halt.

Now there’s still no shortage of oil and LNG waiting to be pumped from the earth. But the demand side is almost certain to rocket higher once the virus is eradicated or effectively controlled.

JPMorgan Chase & Co, for one, has been turning its attention towards shares in the beaten down energy sector. In a note on 26 September, which whilst nearly one year ago is still highly relevant, JP Morgan’s Dubvrako Lakos-Bujas wrote (as quoted by Bloomberg):

Investor complacency toward energy is perplexing. The market should assign a structural premium to the equity-oil complex with the Middle East currently a geopolitical tinderbox…

Favorable technicals, improving fundamentals with stabilizing business cycle, and ongoing geopolitical tensions in the Middle East could help redirect flows into this universally hated and cheap sector.

In its interim result for the half year to 30 June 2020, released on 25 August, Oil Search offered production guidance of 27.5 million to 29.5 million barrels of oil in 2020. This follows on it pumping 14.7 million barrels of oil in the first half of the year, its best production figure since 2018.

With that said, the Oil Search share price isn’t one that’s likely to rocket higher in the short term. But if you have an investment horizon of 2-3 years, I think today’s price of $3.22 per share could present a great bargain.

More reading

• Where to now for the ASX energy shares?
• Oil Search share price rises after interim half year result

Motley Fool contributor Bernd Struben 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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Cleanaway Waste Management Ltd (ASX: CWY) has just capped off a stellar month for shareholders. Over the month of August, the Cleanaway share price went from $2.12 to $2.58 on yesterday’s closing price. That represents a gain of 21.7% with the Cleanaway share price now up 26.4% in 2020 so far. The shares have pulled back slightly on the first day of the new month today and are going for $2.54 at the time of writing.

Why did Cleanaway clean up in August?

The Cleanaway share price had a top month in August for one big reason: the company’s impressive earnings report for the 2020 financial year. Cleanaway released its earnings report last week, and investors were very pleasantly surprised.

Cleanaway managed to deliver a 2.1% increase to revenue and an 8.7% increase to its earnings per share (EPS). Free cash flow was also up an impressive 11.5%.

That enabled Cleanaway to announce a 2.1 cents per share fully franked final dividend, which represents a 10.5% increase on FY19’s final payout. For FY20, the company will pay out a total of 4.1 cents per share, which is a 15.5% increase on FY19’s 2.55 cents per share.

Companies that have the capacity to not only keep steady but increase their dividends in 2020 have been very few and far between. Most ASX shares have been going in the other direction. Thus, I think this is the primary reason why investors have been clambering to buy Cleanaway over the past month.

Is the Cleanaway share price a buy today?

There’s a lot to like about this company in my view. It is growing at a healthy (if uninspiring) rate and has proven to be highly resilient and defensive in these tough economic times. Garbage and waste collection is something we all need and expect and this isn’t going to change anytime soon. It’s as future-proof a sector as you can get.

Saying that, the market is certainly putting a premium on the Cleanaway share price that, in my opinion, more than reflects this reality. On current prices, Cleanaway is trading on a price-to-earnings (P/E) ratio of 46.37. The current average for the S&P/ASX 200 Index (ASX: XJO) is 18.34.

I’m not too sure a company growing revenues at 2.1% deserves such a multiple. Therefore, I’ll be staying away from Cleanaway shares at these prices. It’s a great company, but as Charlie Munger once said, “No company, no matter how great, is worth an infinite price”. Over the past year, the Cleanaway share price has fluctuated between $1.40 and $2.59. With such a volatile stock, I’d be far more comfortable waiting for a dip than buying at today’s prices.

More reading

• ASX 200 falls 1.8%, Afterpay drops 8%
• 3 ASX blue-chip shares I would buy at today’s prices
• What you need to know about the RBA’s rate decision today
• How the rising Aussie dollar could drive the Carsales share price to new all-time highs
• Revealed: Risk-reward myth shattered

Motley Fool contributor Sebastian Bowen 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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ASX investors are increasingly turning to the Unites States share markets as well as our own ASX to buy shares in their favourite companies. The Commonwealth Bank of Australia‘s (ASX: CBA) CommSec brokerage platform has just released data on which international shares ASX investors were buying in the period 24-28 August. We’ve already looked at the most popular ASX shares over that time, so here are the top 5 most-traded US shares as well.

1) Tesla Inc. (NASDAQ: TSLA)

As usual, electric car and battery manufacturer Tesla tops the list for the most traded international share last week. 7.9% of all CommSec international trades were for Tesla shares, with 84% of those trades being buys. Tesla continues to make headlines for its meteoric rise (as well as the 5-for-1 stock split which went ahead last night (our time)). In its first day of post-split trade, Tesla shares were up another 12.5% to US$498.32 (or US$2,491.60 in pre-split terms). Tesla shares are now worth more today post-split than they were at the start of the year. Go figure.

2) Apple Inc. (NASDAQ: AAPL)

Stock no. 2 is another stock split star. Apple’s 4-for-1 stock split also went ahead last night. Apple shares are today costing US$129.04 after hovering around US$500 last week pre-split. Despite a stock split delivering no real tangible benefits for investors apart from increasing affordability, investors didn’t seem to care when they pushed up Apple’s share price by almost 4% last night.

3) Nio Inc. (NYSE: NIO)

Nio is another electric car manufacturer, and one often called the ‘Tesla of China’. Nio is based in China but listed on the New York Stock Exchange under an ADR (Authorised Depository Receipt) structure. It appears that goodwill from Tesla is spilling into Nio shares, as they are up more than 400% year to date. ASX investors do like their electric vehicle makers these days, it seems.

4) Microsoft Corporation (NASDAQ: MSFT)

Microsoft is our next stock on the list. Unlike Tesla and Apple, there was no ‘hot gossip’ swirling around Microsoft shares in recent weeks, so perhaps ASX investors are just attracted to this tech stalwart’s incredible business model and cash flows. Microsoft is one of the largest companies in the world. It sells its Windows and Office products as well as its Azure cloud services and Xbox gaming consoles. Thus, it’s understandable that ASX investors are looking for a slice of this pie.

5) NVIDIA Corporation (NASDAQ: NVDA)

NVIDIA is not a stock that often appears on this top 5 list. This company makes computer and graphics chips and is regarded as a leader in the artificial intelligence (AI) space. NVIDIA stock is up more than 20% in the past month, so that might explain why it makes the list of top US shares for ASX investors this week.

More reading

• Apple just split its stock: Here’s why this tech stock might be next
• Better buy: Amazon.com vs Microsoft
• This chart shows why big banks are in trouble
• Tesla stock splits: Here’s what investors should know
• Apple’s stock split Monday. Here’s what you need to know.

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 Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Microsoft, NVIDIA, and Tesla and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia has recommended Apple and NVIDIA. 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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This year has seen some great bargains for ASX blue-chip shares. Investors who picked up shares in Macquarie Group Ltd (ASX: MQG) and Domino’s Pizza Enterprises Ltd (ASX: DMP) during the March sell-off would be up 78% and 94%, respectively.

With the S&P/ASX 200 Index (ASX: XJO) down 1.8% for the day, now could be a great time to buy a quality business that has the potential to push its share price higher over the next 12 months.

Here are my picks for 3 top blue-chip shares that I would buy today.

Woolworths Group Ltd (ASX: WOW)

Woolworths has always been considered a quality company with supermarket revenues resistant to economic crises. However, the same cannot be said of its hotels business, which has been severely impacted by the COVID-19 pandemic.

Since the supermarket giant released its FY20 results to the market last week, the Woolworths share price has been on a mini rollercoaster ride. The group reported a net profit after tax of $1,602 million, a drop of 1.2%. Although conditions remain challenging in the short-term, management is adamant that sales growth will resume as seen in the first 8 weeks of FY21.

The Woolworths share price has dropped 2.56% today to $38.38 (at the time of writing). I think today would be a great time to pick up some of its shares.

Newcrest Mining Limited (ASX: NCM)

One of the world’s largest gold mining companies, Newcrest has been surging on the back of gold’s rising spot price. Although the Newcrest share price has been down 10% over the past month, I don’t believe this is cause for concern.

This is because the precious metal reached an all-time high of US$2,074.88 in early August. While the spot price has since receded, gold could reach new territory again amid the economic uncertainty.

In the company’s FY20 report card to the market, Newcrest achieved an underlying profit of $750 million, up 34% from FY19. To further support its growth plans, the gold mining outfit invested $1.3 billion to acquire Red Chris and increase its exposure to Fruta del Norte.

I think that every portfolio should have some gold exposure as protection against extreme market volatility. In light of this, I would be happy to buy Newcrest shares at today’s price of $32.10 (at the time of writing).

Cochlear Limited (ASX: COH)

The Cochlear share price has declined 25% from its all-time high reached in early February. At one point, shares were down 6.4% over the past week.

The global leader in implantable hearing solutions has experienced difficult trading conditions during COVID-19. In its FY20 report, profit collapsed 42% from the prior year and management advised of some impacts on the number of patient assessments for cochlear and acoustic implants.

However, the weakness in its share price could be an opportunity for patient investors as the company is confident business will normalise post COVID-19.

At the time of writing, the Cochlear share price is trading at $190.67.  I would add it to my buy list of quality blue-chip companies.

More reading

• What you need to know about the RBA’s rate decision today
• 3 strong ASX blue chip shares with stellar long term growth prospects
• How the rising Aussie dollar could drive the Carsales share price to new all-time highs
• Revealed: Risk-reward myth shattered
• What do you do after record share price gains?

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 Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Cochlear Ltd. and Domino’s Pizza Enterprises 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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I think it makes a lot of sense to invest in ASX tech shares.

I’m not saying that just because technology is ‘cool’. I think the businesses that predominately offer technology have inherent advantages that many other sectors simply don’t have.

Commodity businesses have to hope that their customers will continue to need more product at a similar or higher price. Banks are heavily reliant on a good economy and they are (rightly) under heavy regulation. Insurers seem to get smashed every few years by a natural hazard event. And so on.

Cheap replication of software

ASX tech shares don’t have a lot of major costs once the software is developed. Some businesses have very high gross profit margins. For example, Xero Limited (ASX: XRO) reported a gross profit margin of 85.2% in its FY20 result. When the gross profit margin is that high, it turns a lot of the revenue from new customers into profit at the earnings before interest, tax, deprecation (EBITDA) level.

Once an ASX tech share like Xero, Pushpay Holdings Ltd (ASX: PPH) or others have developed the software, it can be replicated very cheaply and rapidly. If Tesla wants to sell another car, it needs to manufacture it and ship it. A software business can just instantly distribute it over the internet. It makes it very easy to grow the business at a rapid rate.

A business like Pushpay – which offers tools for electronic donations for US churches – is very attractive. It can sell its product to any church in the US whilst utilising its existing software. A wonderful business like A2 Milk Company Ltd (ASX: A2M) has had to spend a lot of effort to build up its logistics network in the US. A2 Milk has to ship physical products to customers unlike many software businesses.

Pushpay was very successful at improving its profitability in FY20 with its gross profit margin rising by five percentage points from 60% to 65%. Pushpay is aiming to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) in FY21.

Software as a service (SaaS)

Not only do the best ASX tech shares offer rapid growth and high profit margins, but they also have quite sticky revenue with their existing customer bases. Perhaps they could be called defensive ideas. 

A client can’t quickly switch from Xero. It would take a lot of time (and therefore money) to be trained up on a new system. Plus, if the ASX tech share’s software is really good, then the client wouldn’t even want to leave.

A business like Altium Limited (ASX: ALU) is another good example of this. Every year it materially builds its subscriber numbers and this helps grow Altium’s revenue.

I like ASX tech shares that are able to offer a product that is regularly improved. Altium regularly updates its software. The SaaS model means that software companies can expect regular annual (or even monthly) cashflow from their clients which will continue for the foreseeable future.

ASX tech shares I’d buy today

There are plenty of ASX software businesses that look a bit bubbly to me. However, there are also others that look good value such as Pushpay and Citadel Group Ltd (ASX: CGL).

I also have my eye on names like Kogan.com Ltd (ASX: KGN), Redbubble Ltd (ASX: RBL) and even BetaShares NASDAQ 100 ETF (ASX: NDQ). However, whilst these names have done very well since the COVID-19 crash, it’s hard to say if they’re good value because it’s difficult to know if the shift to online is somewhat temporary (in the shorter-term) or permanent.

More reading

• What do you do after record share price gains?
• Why Lendlease, Redbubble, SeaLink, & Starpharma shares are pushing higher
• 4 ASX growth shares I’d buy in September
• Top ASX Stock Picks for September 2020
• If you invested $10,000 in Kogan shares 5 months ago, here’s how much you’d have today

Tristan Harrison owns shares of Altium. 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 BETANASDAQ ETF UNITS, Kogan.com ltd, and Xero. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Citadel Group Ltd, and Kogan.com 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 Reserve Bank of Australia (RBA) signaled that the good times will continue to roll on for borrowers at the expense of savers.

Our central bank held the official cash rate and three-year government bond yield target steady at 0.25%, but expanded its term funding facility.

The S&P/ASX 200 Index (Index:^AXJO) and the Australian dollar was largely unmoved by the news, which all but guarantees record low rates for loans and savings accounts.

Low interest rates for everyone

The term funding facility (TFF) gives authorised deposit-taking institutions (ADIs), which includes banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), access to cheap funds.

The TFF was meant to expire in September but the RBA extended this to the end of June 2021 and increased the size of the facility to $200 billion.

ADIs can tap the TFF for three-year loans at up to 2% of their outstanding credit and only pay 0.25% interest to fund their loan book. To date, ADIs have drawn down $52 billion with the RBA expecting banks to make further drawings over the coming weeks.

Debt to keep economy afloat

“This will help keep interest rates low for borrowers and support the provision of credit by providing ADIs greater confidence about continued access to low-cost funding,” said RBA Governor Philip Lowe.

“The Term Funding Facility and the other elements of the Bank’s mid-March package are helping to support the Australian economy.

“There is a very high level of liquidity in the Australian financial system and borrowing rates are at historical lows.”

It’s a demand, not supply issue

But access to cheap debt isn’t really the issue. The main problem is poor demand for debt due to rising unemployment amid the COVID-19 recession. Those with no jobs or job security won’t be in the mood to borrow.

Throw in the stricter lending criteria imposed by the banks because of the weakening economy, and the limits to the RBA’s monetary prowess becomes painfully apparent.

The most desperate borrower in Australia

The only ones that’re desperately in need to borrow are the state and federal governments as they are forced to spend big to support our struggling economy.

Thankfully, governments aren’t having any issue on this front. The market showing no indigestion issues even as government debt issuances surge and the RBA stands ready to be the lender of last resort.

“Over the past month, the Bank bought a further $10 billion of Australian Government Securities (AGS) in support of its 3-year yield target of 25 basis points,” added Dr Lowe. “Since March, the Bank has bought a total of $61 billion of government securities.”

Lower for longer

But with all the twists and turns in the path to COVID recovery, particularly for Victoria, the RBA reassured the market that it will provide support for as long as necessary.

In other words, interest rates here won’t be going up for a long while. Good news for those who are willing and able to borrow.

More reading

• 3 ASX blue-chip shares I would buy at today’s prices
• How the rising Aussie dollar could drive the Carsales share price to new all-time highs
• Revealed: Risk-reward myth shattered
• What do you do after record share price gains?
• Here’s why the Telstra share price fell 15% in August

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

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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If you’re wishing to bolster your portfolio with the addition of some ASX blue chip shares, then you might want to consider the ones listed below.

Here’s why I think these blue chip ASX shares could be great long term options for investors:

Cochlear Limited (ASX: COH)

The first blue chip ASX share to consider buying is Cochlear. I think the hearing solutions specialist could be a great long-term investment due to the ageing populations tailwind. As our hearing has a tendency to fade when we get older, I’m confident that ageing populations will lead to growing demand for its high quality products over the next couple of decades. In addition to this, I’m a big fan of the company due to its heavy investment in research and development and the industry’s high barriers to entry. Combined, I expect these to allow Cochlear to maintain its leadership position and limit competition in the future.

CSL Limited (ASX: CSL)

The CSL share price has uncharacteristically been an underperformer in recent months and is trading around 18% lower than its 52-week high. I think this pullback is a buying opportunity for investors with a long-term focus. This is because I’m confident the biotherapeutics company is well-positioned to deliver solid sales and earnings growth over the long term. This is thanks to increasing demand for immunoglobulins, its growing plasma collection network, and its lucrative research and development pipeline.

SEEK Limited (ASX: SEK)

A final blue chip ASX share to consider buying is SEEK. I think the job listings company is one of the best long-term options on the Australian share market. This is due to its growing China-based operations, its market domination in the ANZ market, and investment in future growth opportunities. In FY 2020 SEEK delivered a small increase in revenue to $1,577.4 million. And while FY 2021 will be tough because of the pandemic, I’m confident the company’s growth will accelerate once the crisis passes. This should put it back on a path to achieving its aspirational revenue target of $5 billion later this decade.

More reading

• 3 ASX blue-chip shares I would buy at today’s prices
• 3 market-beating ASX blue-chip shares
• Up 38% in August, is the Mesoblast share price a buy?
• 2 ASX shares I would buy right now for both growth and income
• Where to invest $20,000 into ASX shares immediately

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and SEEK 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 Carsales.Com Ltd (ASX: CAR) share price hit a new record high of $21.23 last Monday, 24 August. The price has since retraced a bit, down 3% from the high. But that still leaves Carsales shareholders up a tidy 23% year-to-date.

Like most every share on the S&P/ASX 200 Index (ASX: XJO), Carsales shares were savaged during the COVID-19 panic selling, falling 45% from 12 February through 23 March.

Since the March low, the Carsales share price has gained 97%. In comparison, the ASX 200 has gained 31% over that same time.

What does Carsales do?

Carsales.Com is Australia’s largest online automotive, motorcycle and marine classifieds business. The company also has operations and interests in a range of different automotive classifieds websites in countries across Asia and South America, making it one of the largest digital automotive advertising businesses in the world.

Together with its subsidiaries, Carsales employs more than 600 people in Australia to develop leading technology and advertising solutions that drive its business around the world.

Carsales shares first began trading on the ASX in 2009.

Why the Carsales share price could head for new record highs

The company’s full 2020 financial year results, released on 19 August, helped drive the Carsales share price to new record highs. Despite headwinds thrown up by the coronavirus, the company managed to increase its underlying revenue by 1% from the previous year. Net profit after tax (NPAT) also increased 6% to reach $138 million.

So, with its share price recently hitting new records, why could Carsales be heading even higher?

Aside from its proven business model and a likely consumer spending spree once the economy begins to recover from COVID shutdowns, I believe the rapidly strengthening Aussie dollar will see a marked increase in future revenue.

As recently as 19 March, the Australian dollar was worth 57 US cents. Today it’s worth just shy of 74 US cents. And leading economists are tipping this to head towards 80 US cents over the next year.

Now predicting currency movements is notoriously difficult. But with the US Federal Reserve indicating it’s happy to see inflation run over its previous 2% target figure, I believe these economists have it right.

With a strong Aussie dollar, the price of imported cars – and most all our cars are imported – falls. That should encourage more people to buy new cars, which will in turn see more used cars sold on Carsales.

And that should translate to higher Carsales share prices ahead.

More reading

• 3 ASX blue-chip shares I would buy at today’s prices
• What you need to know about the RBA’s rate decision today
• Revealed: Risk-reward myth shattered
• What do you do after record share price gains?
• Here’s why the Telstra share price fell 15% in August

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com 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.

The post How the rising Aussie dollar could drive the Carsales share price to new all-time highs appeared first on Motley Fool Australia.

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The Telstra Corporation Ltd (ASX: TLS) share price has continued its poor run and is tumbling lower again on Tuesday.

At the time of writing the telco giant’s shares are down over 1.5% to a 52-week low of $2.84.

Why is the Telstra share price trading at a 52-week low?

The Telstra share price has come under considerable pressure since the release of its full year results last month.

Although the company delivered a result in line with its guidance and maintained its full year dividend at 16 cents per share, its guidance for FY 2021 spooked investors.

Telstra’s guidance shows that its earnings will be impacted more than expected by the COVID-19 pandemic this year. It expects its underlying EBITDA to be in the range of $6.5 billion to $7 billion.

This suggests that its current dividend could be at risk based on its current policy.

Management explained: “We remain clear that, adjusted for recent accounting changes, our EBITDA, post the nbn, needs to be in the order of $7.5 – 8.5 billion to pay a dividend around 16 cents under the 70 to 90 percent payout ratio in our capital management framework.”

As a result of this, the market appears to be predicting a dividend cut down to ~12 cents per share in FY 2021. This has led to its shares dropping down accordingly since its results release.

Is the Telstra dividend going to be cut?

I’m optimistic that a dividend cut can be avoided if the company elects to change its dividend policy.

Right now, its policy is based on its accounting earnings, which are actually lower than its free cash flows. So, if the company were to shift to a free cash flow-based policy, it should be sustainable at the current level.

Analysts at Goldman Sachs also appear optimistic that this could be the case.

It explained: “Although 16cps is now unsustainable across FY21-22 on the existing payout policy, we note TLS further shifted its dividend focus to FCF ( i.e. TLS justified the 99%, out-of-policy EPS payout as this was well supported by cashflow). Hence we have not revised our 16c dps, believing Telstra will maintain this through FCF, if it believes that is on track for $7.5bn by FY23E.”

Should you invest?

The pullback in the Telstra share price has been very disappointing for shareholders, but I believe it has created a compelling buying opportunity for non-shareholders.

With the market appearing to have now priced in a dividend cut, I believe the downside is limited from here.

There’s also the added bonus of a probable re-rating higher if Telstra decides to shift its policy and is able to maintain its dividend.

As a result, I think the Telstra share price is a strong buy at the current level.

More reading

• Here’s why the Telstra share price fell 15% in August
• Zip and Brainchip were among the most traded shares on the ASX last week
• Why I’d buy Wesfarmers and 1 other quality ASX dividend right now
• Telstra and 1 more hot ASX dividend share to buy
• ASX 200 Weekly Wrap: Earnings drag ASX back to reality

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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.

The post The Telstra share price just hit a 52-week low: Is it time to buy? appeared first on Motley Fool Australia.

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