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The Fortescue Metals Group Limited (ASX: FMG) share price has built a reputation as one of the few solid blue chip performers on the S&P/ASX 200 Index (ASX: XJO) in 2020 so far. Despite its gains over the past few months, the ASX 200 is still down around 11% year to date. The Fortescue share price contrasts nicely with this and is up more than 60% over the same period.

But August wasn’t a good month for Fortescue. While the ASX 200 was up 2.3% for the month, the Fortescue share price went backwards and was almost a mirror image of the ASX 200, falling by 2.52% over the same period.

So what happened for Fortescue?

Fortescue’s average month… or not?

On the surface, it looks as though Fortescue just had a pretty average kind of month. But there is more going on under the surface. Consider this, Between 3 August and 28 August, the Fortescue share price was up 8%. It was only a big fall at the end of the month that pulled Fortescue under. You might think this catalyst was the FY2020 earnings report that Fortescue delivered last week. But the market barely blinked at the company’s surging revenues and profits.

No, we can explain the end-of-month Fortescue share price slump with just one word: dividends. In its earnings report, Fortescue announced the payment of a final dividend of $1 per share. That payout went ex-dividend just yesterday, which happened to be the last day of the month. Based on the Fortescue share price on Friday, that fully franked dividend of $1 per share equates to a yield of 5.3%. Normally, a 5.3% dividend would be at the upper end of what a typical ASX blue chip would offer as an annualised yield, but that’s just for 6 months in Fortescue’s case. Fortescue actually paid out $1.76 in dividends for FY20, which equates to a 9.33% yield on Friday’s price and a 10.07% yield on today’s share price. That’s a monster yield in anyone’s books.

And that’s why Fortescue shares plunged yesterday and gave investors a -2.53% return in August. When a company goes ex-dividend, new shareholders aren’t entitled to that payment. Thus, those shares are automatically worth 5.3% less as of the ex-dividend date. That explains Fortescue’s plunge yesterday.

Are Fortescue shares a buy today?

You might be looking at that dividend yield and salivating, but are Fortescue shares a buy today for future dividend income? Well, it’s worthwhile noting that Fortescue shares are sitting on top of an iron ore price that has climbed to the historically high level of US$120 per tonne. As long as it stays near these levels (or climbs higher), Fortescue will be able to fund the kinds of dividends we have just seen. But iron ore is a notoriously cyclical commodity, and thus there is a significant risk that it will fall back to earth in the short-to-medium term. If and when that does happen, Fortescue’s ability to fund these kinds of dividend will dry up.

As such, I’m not too wild about buying Fortescue today at these high prices. I think the best time to buy a cyclical company like Fortescue is when no one else wants to. And even though I might miss out on a year or two of hefty dividend payments, I’d feel far more comfortable buying Fortescue at a low point in the iron ore cycle.

More reading

• These ASX stocks at earnings risks as the Aussie is forecast to hit US80 cents
• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• Is the Treasury Wine share price a buy after a 14% slump in August?
• ASX 200 drops 0.2%, Scentre soars
• 2 ASX dividend shares with yields over 10%

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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The Australian dollar surged to more than two-year high and some experts are predicting it will go a lot higher. That’s bad news for many S&P/ASX 200 Index (Index:^AXJO) stocks.

The Aussie battler is currently trading at US74 cents, taking its gain since the depth of the COVID-19 in March to nearly 30%.

The advance isn’t over as market economists are predicting our dollar to hit US80 cents next year, reported the Australian Financial Review.

What’s driving the exchange rate

It’s more the weakness of the greenback than the strength of the Aussie that is driving the latest rally. The change in the US Federal Reserve’s inflation targeting policy is causing the US dollar to lose ground against its peers.

The Fed signalled it will tolerate a temporary jump in inflation above its comfort zone. This means it can release more stimulus into the market without worrying about inflationary pressure.

Unless the Reserve Bank of Australia (RBA) announces something unexpected when it releases its interest rate decision at 2.30pm today, the Aussie is likely to stay on the front foot.

A$ finding support from commodities

But the rise of the Aussie isn’t only supported by a flagging US dollar. The stubbornly high iron ore price, which surged nearly 35% to over US$122 a tonne over the past year is also fuelling its ascend.

There’s also a bit of a virtuous cycle happening here. The retreating US dollar tends to lift commodity prices, including copper and gold. Commodity exporting nations like Australia and Canada will see increase demand for their currencies as a result.

Further, the RBA is far more resistant to pumping liquidity into our financial system compared to others, including the Fed. This means less downward pressure on our currency than the US dollar.

Why a stronger Australian dollar is a headwind

However, a strong Aussie isn’t what we need as Australia awaits official confirmation this week that our economy has slumped into a recession. A stronger local currency is an earnings headwind for large cap stocks on a net basis.

If the Aussie is on a new uptrend as currency forecasters are predicting, we could see earnings downgrades start to flow through ahead of the February reporting season.

ASX stocks with large US dollar exposure will see earnings drop when profits are converted into the Australian dollar.

ASX stocks facing earnings headwinds

Many of these companies have hedging contracts in place to reduce the volatility, but even then, the expected big more in the Aussie towards US80 cents will hurt.

Some of the ASX large caps with significant US exposure includes global logistics group Brambles Limited (ASX: BXB), building materials supplier James Hardie Industries plc (ASX: JHX) and gaming machine maker Aristocrat Leisure Limited (ASX: ALL).

Even the Afterpay Ltd (ASX: APT) share price will feel the heat given it’s counting on its US expansion to became a key growth driver for the tech superstar.

Let’s hope the Aussie bulls are wrong.

More reading

• Zip and Brainchip were among the most traded shares on the ASX last week
• Why the Fortescue share price went backward in August
• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• Zip share price drops lower despite completing QuadPay acquisition

Motley Fool contributor Brendon Lau owns shares of Aristocrat Leisure Ltd. and James Hardie Industries plc. Connect with me on Twitter @brenlau.

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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A former BlueScope Steel Limited (ASX: BSL) executive has pleaded guilty to inciting colleagues to give false evidence to a cartel enquiry.

Jason Ellis was the general manager of sales and marketing at BlueScope when he instructed two other employees to give false evidence to the Australian Competition and Consumer Commission (ACCC).

The watchdog was investigating alleged cartel behaviour at BlueScope, and Ellis’ incitement related to conversations he and the colleagues had with other steel companies.

According to ACCC Chair, Rod Sims, the conviction was unprecedented.

“This is the first time an individual has been charged with inciting the obstruction of a Commonwealth public official in relation to an ACCC investigation,” he said.

The Motley Fool has contacted BlueScope Steel for comment.

Ellis will be sentenced at a local court hearing on 8 December.

ACCC’s separate civil case against Ellis and BlueScope remains in the Federal Court.

In that case, the competition watchdog alleges BlueScope and Ellis attempted to put in a price fixing regime with multiple steel distributors.

The BlueScope share price was down 2.44% as at 12:50pm AEST, to fall to $12.38. It was as high as $18.83 back in July 2018.

More reading

• Top brokers are urging investors to buy these ASX stocks today
• Bluescope Steel shows strength amid 90% profit fall
• The next ASX stocks to beat expectations during this reporting season

Motley Fool contributor Tony Yoo 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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In afternoon trade the the S&P/ASX 200 Index (ASX: XJO) is off its lows but still deep in the red. At the time of writing the benchmark index is down 1.9% to 5,943 points.

Four shares that have not let that hold them back are listed below. Here’s why they are pushing higher:

The Lendlease Group (ASX: LLC) share price is up 2.5% to $11.88. Investors have been buying the international property and infrastructure company’s shares after brokers responded positively to its strategy update. One broker that liked what it saw was Goldman Sachs. This morning it retained its conviction buy rating and lifted the price target on its shares to $16.37.

The Redbubble Ltd (ASX: RBL) share price has jumped 6% to $4.16. This is despite there being no news out of the ecommerce company. However, last week analysts at Morgans upgraded the company’s shares from a reduce rating to an add rating with an improved price target of $4.33. It was impressed with its full year results and believes it is in the right place at the right time.

The Sealink Travel Group Ltd (ASX: SLK) share price is up over 4% to $4.95. Investors have been buying the travel and transport company’s shares since the release of its full year results on Monday. One broker that was pleased with its results was Ord Minnett. This morning its retained its buy rating and lifted the price target on its shares to $6.08. It likes the way the company is transforming into a defensive business with growth options.

The Starpharma Holdings Limited (ASX: SPL) share price has jumped 11.5% higher to $1.69. The catalyst for this was the announcement of the development of a slow release soluble DEP remdesivir nanoparticle. According to the release, Starphrma has applied its novel DEP drug delivery technology to create a long-acting, water soluble version of remdesivir. Remdesivir is an antiviral drug which is currently being developed by US giant Gilead to treat COVID-19.

More reading

• Starpharma share price rockets to record high on DEP remdesivir COVID-19 news
• ASX 200 edges higher: Fortescue sinks, NAB sells MLC Wealth, Costa jumps
• Sealink share price jumps higher after delivering strong profit growth in FY 2020
• Starpharma share price rockets to 52-week high on full year update
• This ASX dividend share offers a 9% fully franked yield

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 Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma 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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At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) is having a terrible start to the month. While all sectors are currently in the red, the tech and financial sectors are weighing heavily on proceedings.

The benchmark index is currently down 1.7% to 5,959.9 points.

Here’s what is happening on the ASX 200 today:

Afterpay sinks on PayPal news.

The Afterpay Ltd (ASX: APT) share price has come under pressure today following an announcement by PayPal overnight. The payments giant has revealed plans to launch Pay in 4 in the United States in the fourth quarter of 2020. As its name implies, the service will allow consumers to buy things and spread the payment out over four interest-free instalments. Afterpay’s ASX-listed rivals are all falling hard on Tuesday.

QBE sacks its CEO.

The QBE Insurance Group Ltd (ASX: QBE) share price has tumbled notably lower today after announcing the shock sacking of its CEO. This morning the insurance giant revealed that it had given Pat Regan the boot following an external investigation concerning workplace communications. While no real details were provided by the company, it advised that the investigation found his communications did not meet the standards set out in the company’s code of ethics and conduct. This led to the board taking decisive action.

Bank shares lower.

Westpac Banking Corp (ASX: WBC) and the rest of the big four banks are all trading lower today and are weighing heavily on the ASX 200. The worst performer in the group is the National Australia Bank Ltd (ASX: NAB) share price with a decline of almost 3%. Investors appear nervous ahead of the Reserve Bank’s meeting this afternoon.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Tuesday has been the Bingo Industries Ltd (ASX: BIN) share price with a modest 2% gain on the back of no news. The worst performer on the index is the Afterpay share price with a decline of over 6%. This follows PayPal’s entry into the buy now pay later space.

More reading

• This chart shows why big banks are in trouble
• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• Zip share price drops lower despite completing QuadPay acquisition
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• 4 ASX growth shares I’d buy in September

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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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.

Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) both generated big gains for investors this year. Amazon’s stock soared more than 80% as its e-commerce and cloud businesses shone throughout the COVID-19 crisis, and Microsoft’s stock rallied nearly 50% as its cloud growth offset weaker demand for its enterprise-oriented products.

Can Amazon and Microsoft maintain those big gains? Let’s dig deeper into both tech giants to see which tech giant is the better overall investment.

The key differences between Amazon and Microsoft

Amazon generates most of its revenue from its online marketplaces, but most of its profits come from AWS (Amazon Web Services), the world’s largest cloud infrastructure platform.

Amazon subsidizes the growth of its lower-margin marketplaces, and their respective hardware and software ecosystems, with profits from AWS. That’s why Amazon can consistently sell products at low prices, launch new hardware devices at low margins, and offer more digital content and perks to expand its Prime ecosystem – which surpassed 150 million paid subscribers last year.

Microsoft’s business consists of three main segments: Productivity and Business Processes, which provides productivity software like Office and Dynamics; the Intelligent Cloud, which includes Azure and its server products; and More Personal Computing, which sells Windows licenses, Xbox consoles and games, and Surface devices.

Last year, Microsoft’s “commercial cloud” revenue, which include all its public cloud services, accounted for 40% of its top line. Microsoft’s expansion of that business over the past six years under CEO Satya Nadella pivoted the tech giant away from its legacy software products and unlocked new growth engines in the cloud and mobile markets.

How fast are these tech giants growing?

Amazon’s revenue and earnings rose 20% and 14%, respectively, in 2019. In the first half of 2020, its revenue climbed 34% as its earnings grew 24%.

Amazon’s online marketplaces generated robust revenue growth throughout the first half of the year as COVID-19 closures boosted its online sales, but its North America unit’s operating profit fell year-over-year, and its international unit remained unprofitable. Those units already operated at low margins, but higher COVID-19 expenses exacerbated the pressure.

However, a 48% year-over-year jump in AWS’ operating profits easily offset the lower margins of its e-commerce marketplaces in the first half. It also expects its COVID-19 expenses to decline sequentially in the third quarter.

Amazon didn’t provide any guidance for the full year, but analysts expect its revenue and earnings to grow 31% and 37%, respectively.

Microsoft’s revenue rose 12% in fiscal 2020, which ended on June 30, as its adjusted earnings grew 14%. The pandemic throttled sales of its enterprise-oriented productivity software as companies cut back their spending, but generated tailwinds for its cloud, Windows, and gaming businesses – all of which benefited from remote work and stay-at-home measures.

Microsoft’s commercial cloud revenue rose 36% to over $50 billion in 2020. That growth was led by Azure, which ranks second in the cloud platform market after AWS. Microsoft doesn’t disclose Azure’s exact growth rate, but it grew at an average rate of nearly 60% in constant currency terms over the past four quarters.

Microsoft also didn’t provide any full-year guidance, but analysts expect its revenue and earnings to rise 10% and 12%, respectively.

The tailwinds and headwinds

Amazon and Microsoft will both benefit from the secular growth of the cloud market, which is well-insulated from macro headwinds like the trade war and COVID-19. Amazon will also profit from the ongoing expansion of the e-commerce market, while Microsoft’s gaming growth should accelerate with the launch of the Xbox Series X later this year.

Those tailwinds are strong, but both companies also face unpredictable headwinds. Amazon is growing increasingly dependent on third-party sellers – some of which have been accused of selling fake products – to drive its e-commerce sales. New regulations could sever those relationships and throttle Amazon’s long-term e-commerce growth. Microsoft’s Azure growth also decelerated last quarter, sparking concerns about competition from AWS and other rivals, and the Xbox Series X will likely still face fierce competition from Sony‘s PS5.

The valuations and verdict

Amazon currently trades at over 110 times forward earnings and it doesn’t pay a dividend. Microsoft’s stock trades at 35 times forward earnings and it pays a forward yield of 0.9%. Neither stock is cheap relative to its growth, but investors seem to be flocking toward both tech giants as defensive plays.

Amazon and Microsoft are both solid long-term investments, but Microsoft’s lower valuation, the upcoming launch of the Xbox Series X, and a potential rebound in its enterprise business after the COVID-19 crisis ends all make it a better buy at current prices.

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

More reading

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• Netflix stock hits all-time highs as subscribers plan to stay post-pandemic
• Prospective Bezos replacement to leave Amazon
• If you invested $10,000 in Amazon stock during the coronavirus market crash, this is how much you’d have now
• Zoom Video to soon appear on Amazon, Facebook, and Google smart display devices

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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. Leo Sun owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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 article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The coronavirus pandemic has shaken Australia’s major four banks.

The big banks have been forced to assist financially stricken customers and have cut or stopped their usually reliable dividends.

Moreover the second wave of COVID-19 in Victoria has dented the prospect of a swift recovery in the national economy.

And now Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) have more bad news to deal with.

Analytics firm JD Power this week released its Australia Retail Banking Satisfaction Study results, and it doesn’t bode well for the big boys.

Despite their flexibility in helping Australians in trouble due to the COVID-19 recession, all four big banks ranked low in customer satisfaction.

Banks outside the major four averaged 785 points while CBA (776), NAB (771), ANZ (762) and Westpac (758) all fell below that mark.

Heritage Bank (872) and ING (843) topped the list, while ASX-listed Bendigo and Adelaide Bank Ltd (ASX: BEN) came third with 824 points.

Generally, publicly listed institutions fared worse than banks that were privately or mutually owned.

Bank	Customer satisfaction (out of 1,000)
Heritage Bank	872
ING	843
Bendigo and Adelaide Bank Ltd (ASX: BEN)	824
People’s Choice Credit Union	815
CUA	788
BankSA	782
Commonwealth Bank of Australia (ASX: CBA)	776
ME Bank	775
Bankwest (owned by CBA)	772
National Australia Bank Ltd (ASX: NAB)	771
Bank of Melbourne (owned by Westpac)	770
St George (owned by Westpac)	769
Suncorp Group Ltd (ASX: SUN)	767
Bank of Queensland Limited (ASX: BOQ)	763
Australia and New Zealand Banking GrpLtd (ASX: ANZ)	762
HSBC Holdings plc (LON: HSBA)	760
Citigroup Inc (NYSE: C)	759
Westpac Banking Corp (ASX: WBC)	758
Source: JD Power, table created by author

COVID-19-induced financial anxiety

The pandemic has struck financial anxiety into Australians, with the study finding 46% of bank customers are dissatisfied with their personal circumstances.

A quarter even said the impact of COVID-19 had been “devastating” or “severely hurtful”.

“It is imperative that banks understand how to provide better support remotely with no current end in sight to social restrictions.” said JD Power banking and payments intelligence head Bronwyn Gill.

“Banks must narrow the gap in support between customers with good and bad financial health… Helping struggling customers make better financial decisions and manage their spending has many positive outcomes, including higher satisfaction, lower attrition, increased reuse and improved advocacy.”

The increased time at home has led to online and mobile banking overtaking in-person and phone banking in all age demographics.

But that’s led to customers struggling with having any issues resolved. Only 31% of customers said their problem resolution experience was “outstanding”, which was down 7 percentage points from the prior year.

“The implication for banks is that providing highly functional digital banking is key to maintaining satisfaction and preventing attrition,” JD Power stated.

Younger customers are less likely to put up with an unsatisfactory experience, with 22% of those born after 1995 threatening to switch banks. That compares to just 5% of Australians born before 1964 who are thinking of doing the same.

Australia Retail Banking Satisfaction Study was compiled from a survey of 5,584 bank customers. Only banks with more than 100 satisfaction responses were rated.

More reading

• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• 5 things to watch on the ASX 200 on Tuesday
• Are ASX banks or miners buys for dividends?
• Bank analyst tells investors to ‘stay away’ from ASX bank shares
• ASX 200 edges higher: Fortescue sinks, NAB sells MLC Wealth, Costa jumps

Motley Fool contributor Tony Yoo 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the month in a very disappointing fashion. At the time of writing the benchmark index is down a sizeable 2.3% to 5,920.4 points.

Four shares that have fallen more than most today are listed below. Here’s why they are tumbling lower:

The Afterpay Ltd (ASX: APT) share price is down 6% to $86.02. Investors have been selling the payments company’s shares (and those of its rivals) after PayPal announced a buy now pay later offering. The US payments giant will launch Pay in 4 in the United States in the fourth quarter of 2020. It will allow consumers to buy things and spread the payment out over four interest-free instalments.

The Flight Centre Travel Group Ltd (ASX: FLT) share price is down over 4% to $12.68. Investors appear to be taking profit after some strong gains over the last few weeks. Prior to today, the Flight Centre share price was up 34% in the space of a month.

The Helloworld Travel Ltd (ASX: HLO) share price is down 4.5% to $1.86 following the release of its full year results. The travel company posted a statutory loss after one-off costs and non-cash impairments of $70 million. Positively, the company has a strong balance sheet and appears well-placed to ride out the storm. Helloworld finished the period with a cash balance of $131.9 million. Though, this has increased to $174.8 million since then following a recent capital raising. 

The QBE Insurance Group Ltd (ASX: QBE) share price has dropped 5% to $10.06 after announcing the shock departure of its chief executive officer. This morning the insurance giant revealed that Pat Regan was given the boot following an external investigation concerning workplace communications. The outcome of this investigation found these communications did not meet the standards set out in the company’s code of ethics and conduct, leading to the board taking decisive action.

More reading

• Zip share price drops lower despite completing QuadPay acquisition
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• 4 ASX growth shares I’d buy in September
• QBE share price tumbles lower after shock CEO sacking
• 2 financial services for the fiscal cliff

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group 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 Aerometrex Ltd (ASX: AMX) share price is 5.71% lower in early morning trade compared with the All Ordinaries Index (ASX: XAO) which is down 1.92% to 6,125.20 points. At the time to writing, the Aerometrex share price is trading at $1.32 following the company’s release of its full-year results for the financial year ended 30 June (FY20). 

What’s moving the Aerometrex share price?

The Aerometrex share price is this morning being sold down despite the company reporting strong growth across the overall business in its FY20 report. This was driven predominately by the company’s LiDAR and 3D segments. Total revenue for the aerial mapping specialist came in at $20.09 million, an increase of 24.7% on FY19’s revenue of $16.1 million.

Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) fell 8.7% to $4.6 million. This was due to the company’s investment in sensor and aircraft assets to support future growth.

Aerometrex recorded a positive cashflow from operations of $8.1 million, up 60% and a strong cash position of $22.2 million.

COVID-19 impact

The business advised that there was no material impact in FY20 from COVID-19, however it expects some logistical challenges due to border closures in the near future. Furthermore, crews have remained in the field longer which has had added some costs to the company.

Aerometrex has $4.5 million of undrawn debt facilities should the need arise to see the company through the pandemic.

What did management say?

Aerometrex Managing Director, Mark Deuter, said:

The Company is continuing to grow strongly in our subscription service MetroMap, in LiDAR and in 3D modelling. We are continuing to execute the growth plans put forward in our Prospectus of December 2019. The Company’s earnings have to a large degree offset cash expenditure on growth and it is pleasing to see a robust normalised EBITDA figure. We are excited at the new capabilities and developments arising from our increased R&D expenditure and we look forward to a successful FY21.

Outlook

Aerometrex did not provide any guidance going into FY21 as it will focus on its near-term strategic priorities. The continued growth of MetroMap has been building in the initial weeks of FY21 with annual recurring revenue (ARR) jumping from $1.66 million at the end of the financial year to $2.87 million at the end of August.

The aerial mapping specialist also expects to see opportunities from its acquisition of Spookfish Australia which will bump up revenue in the coming year.

In the business’ overseas operations, the company has established a base in the United States to capitalise on the significant 3D growth prospects. Aerometrex is currently in ongoing discussions with multinational technology and gaming companies.

About the Aerometrex share price

The Aerometrex share price has regained 89% since its March low of 70 cents. However, since the beginning of the calendar year, the Aerometrex share price is trading 34% lower.

More reading

• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• Zip share price drops lower despite completing QuadPay acquisition
• Tesla stock splits: Here’s what investors should know
• Apple’s stock split Monday. Here’s what you need to know.
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product

Motley Fool contributor Aaron Teboneras 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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News that PayPal is launching a buy now pay later offering in the fourth quarter of 2020 has overshadowed a positive announcement and is weighing on the Zip Co Ltd (ASX: Z1P) share price on Tuesday.

In morning trade the Zip share price is down 6% to $8.59.

What did Zip announce?

This morning Zip announced that shareholders voted overwhelmingly in favour of its acquisition of QuadPay at an extraordinary general meeting on Monday.

As a result, the acquisition has completed successfully along with the issuance of $200 million in convertible notes and warrants to CVI Investments.

Under the terms of the acquisition, the company has issued 118,776,189 fully paid ordinary shares to the QuadPay stockholders and granted 10,480,369 options to subscribe for new fully paid ordinary shares in the future.

What is QuadPay?

QuadPay is a growing US-based buy now pay later provider disrupting the credit card industry with a strong focus on innovation and customer centricity.

As with rival Afterpay Ltd (ASX: APT), it enables customers to pay in four interest-free instalments over 6 weeks for purchases made both online and instore in the $5 trillion dollar US market.

Zip’s CEO and Co-Founder, Larry Diamond, was very pleased to complete the acquisition.

He 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,” he concluded.

More reading

• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• 4 ASX growth shares I’d buy in September
• Why the Zip Co share price rocketed 54% higher in August
• 2 financial services for the fiscal cliff

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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