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The Arena REIT No 1 (ASX: ARF) share price is up 10.5% since last Monday’s closing bell. Over the same 5 days, the S&P/ASX 300 Index (ASX: XKO) – comprising the 300 largest companies on the ASX – is down 0.5%.

At the current $2.42 per share, Arena has a market cap of $825 million.

Long-term investors have enjoyed solid share price gains and regular dividends since the company listed on the ASX in June 2013. But, like with most companies, that came to an ugly end in February when COVID-19 sent investors rushing for the exits.

From 20 February through 23 March, the Arena REIT share price tumbled 58%. It’s rebounded strongly since then, gaining 71% since that low. But Arena’s share price still remains down 16% year-to-date.

What does Arena REIT do?

Arena is a real estate investment trust (REIT). The trust owns, manages and develops properties across Australia. Its portfolio of social infrastructure properties is primarily leased to early learning and healthcare operators, along with some government-tenanted facilities. The company aims to provide investors with earnings growth prospects over the medium to long-term.

Arena REIT is included in the S&P/ASX 300 Index.

Why is the share price up 10.5% in 5 days?

It hasn’t fully recovered from the market rout in February and March, but Arena REIT’s share price has done better than most property shares.

This is largely due to its focus on long-term leases in the 2 sectors that have, in most cases, continued to operate in Australia despite coronavirus lockdowns. Namely, early learning centres and healthcare providers.

Having said that, in its 2020 financial year results released on Thursday, the company noted the rent relief it had provided to some tenant partners amounted to 4% of contracted rent for the 12-month reporting period.

Arena REIT’s share price has gained strongly over the past few days, following positive results in Thursday’s report.

Those included a 16% increase in net operating profit, which reached $43.8 million.

Total assets also increased, up 23% year-over-year to hit $1.01 billion. This was mostly due to acquisitions, development capital expenditure and a positive revaluation of its portfolio. Additionally, the company has been paying down debt, with its debt to equity ratio standing at 14.8% compared to 22.1% the previous year.

With managing director Rob de Vos forecasting that Arena remains well positioned to deliver “earnings growth prospects over the medium to long term”, the Arena REIT share price may yet close the calendar year in the green.

More reading

• Arena share price jumps on FY20 results
• Earnings: Genworth share price plunges 6% after $90 million half-year loss
• Results: Marley Spoon share price surges 40% on market update
• 3 tips for investing in ASX 200 shares for beginners
• How to invest $10,000 in ASX 200 shares for growth and dividends

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.

The post What’s driving Arena REIT’s huge weekly share price gain? appeared first on Motley Fool Australia.

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The Starpharma Holdings Limited (ASX: SPL) share price is bucking the market downtrend today after the biotech announced a new partnership deal.

The news isn’t quite as exciting as Mesoblast limited’s (ASX: MSB) FDA announcement, but shareholders will still be happy to see Starpharma rally 1.9% to $1.05 in late afternoon trade.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) slumped 0.6% as ASX bank stocks dragged the market lower.

Why the Starpharma share price is outperforming

But the pessimism isn’t infecting Starpharma. Management said it signed a research partnership to develop several DEP nanoparticle formulations for an anti-infective drug.

DEP is Starpharma’s drug delivery technology and the partnership is with Tianjin Chase Sun Pharmaceutical Co., Ltd.

Chinese partner with deep pockets

Shanghai Stock Exchange-listed Chase Sun will foot the bill for the development program. Starpharma will initially develop its nanoparticle technology for an anti-infective product for the Chinese partner with the view of enhancing its performance and expanding its therapeutic utility beyond anti-infectives.

If Chase Sun wanted to use the technology in any commercial application, it will need to strike a license agreement with the ASX biotech.

The Chinese partner should have deep pockets as it reported annual sales of over $1 billion in 2019 and its current market capitalisation stands at around $3 billion.

Will the Starpharma share price play catchup?

“We are delighted to sign this new DEP partnership with Chase Sun. Chase Sun are a rapidly growing and innovative company in an important global market,” said Starpharma’s chief executive Jackie Fairley.

“This agreement illustrates the broad applicability of the DEP platform and will further develop the commercial potential of DEP in the anti-infective space, a therapeutic area of growing interest and need.”

Investors will be hoping that the news marks a turnaround in Starpharma’s share price. It fell 13% since the start of 2020.

ASX stocks to buy post COVID-19

This is below the 2% gain by the CSL Limited (ASX: CSL) share price. That says a lot given that the blue-chip biotech isn’t much of a star performer during the COVID-19 pandemic.

If you are hunting for stocks to buy in the post COVID world, you might like to download this free report from the experts at the Motley Fool.

Follow the link below to find out more.

More reading

• What experts are saying about JB Hi-Fi’s profit results as the stock surges to record
• Millennials be warned! ASIC to examine irresponsible ‘social trading’
• These 3 ASX stocks just got upgraded by top brokers to “buy” today
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Altium, Beach, JB Hi-Fi, & Starpharma shares are charging higher

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and 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.

The post The Starpharma share price jumps on new partnership deal appeared first on Motley Fool Australia.

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The ASX is littered with small-cap shares all vying to be global leaders in their fields. These innovative start-up companies seek to pursue untapped market opportunities that could one day bring them to stardom like industry giants CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH).

The key is to identify which ASX small-cap shares have the potential to grow materially in the future and bring investors large returns.

I believe shares within the healthcare sector are a good place to start. People view healthcare as a non-discretionary spend, including in times of economic downturn.

Paradigm Biopharmaceuticals Ltd (ASX: PAR) is one such ASX small-cap share that has a promising outlook ahead. The company is founder-led and is on the cusp of commercialising its patented hero drug.

Below, I put a microscope to Paradigm and explore whether this biopharma share is a buy.

What does Paradigm do?

This late-stage company is focused on repurposing the drug pentosane polysulphate sodium (PPS) for the treatment of musculoskeletal disorders in humans with degenerative disease driven by injury, virus infection, ageing or genetic predisposition.

Paradigm’s leading drug candidate, Zilosul, is used to treat osteoarthrosis (OA), a progressive disease that affects over 240 million globally. The injectable PPS treatment showed its efficacy in patients with OA, resulting in pain reduction, improved joint function, and the prevention of cartilage damaging joints.

Paradigm’s update and addressable market

In September last year, the US Food and Drug Administration (FDA) approved the ‘Expanded Access Program’ whereby Paradigm was able to treat 10 former NFL players who suffer from OA with Zilosul. Trials commenced in February and as of late July, the company revealed that patients reported a 65% mean pain reduction after 12 weeks.

Paradigm confirmed that its primary and secondary Phase III trials are expected to run until late 2022 where results will be announced. However, prior to the completion of these trials, the company will seek provisional approval in Australia with the Therapeutic Goods Administration (TGA).

The potential revenue in the near term is estimated to be $1.5 billion per annum. And should the FDA approve Paradigm’s new drug application following its Phase III results, the addressable market in the US alone is US$9 billion per annum. To put that into perspective, Paradigm’s market cap at the time of writing is $637 million.

Paradigm’s financials

The company released its latest activities statement for the quarter ending 30 June. Paradigm reported a cash on hand balance of $104.6 million, a net operating cash flow of $4.7 million and no debt.

With a strong balance sheet, the biopharma company should be able to fund its operations through 2022 without additional capital raising or loans from creditors.

Should you invest in this ASX small-cap share?

Over the past 12 months, the Paradigm share price has rocketed higher to $2.81, up 102% (at the time of writing).

If the company’s drug Zilosul is approved by both the TGA and FDA to treat sufferers for OA, I believe Paradigm will generate multiple returns for years to come. The potential recurring revenue is enormous should the company penetrate even as little as 10% of the OA market.

In light of this, I would rate Paradigm as a buy for the more risk tolerant investor looking to invest in ASX small-cap shares.

More reading

• Top brokers name 3 ASX shares to sell today
• Why the Paradigm share price is rising today
• 4 exciting ASX biotech shares surging higher today

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.

The post What is the most exciting ASX small-cap share of 2020? appeared first on Motley Fool Australia.

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I spend a lot of time looking at which ASX shares fund managers as I feel it can be important to know where the “smart” money is going.

On this occasion, I thought I would look to see which shares fund managers have been selling. After all, this could arguably be just as important and a potential signal that a share price has topped out.

Here are a couple of updates which have caught my eye this month:

Adairs Ltd (ASX: ADH)

According to a notice of ceasing to be a substantial holder, Commonwealth Bank of Australia (ASX: CBA) has been selling this homewares retailer’s shares. The notice reveals that the banking giant and its subsidiaries offloaded 678,310 Adairs shares on 14 August. The bank received a total consideration of $2,058,128.20 for the parcel of shares, which equates to an average of $3.03 per share.

It looks as though Commonwealth Bank may have been taking a bit of profit off the table after an incredible rise in the Adairs share price over the last five months. Thanks to strong sales growth during the pandemic, its shares have recovered approximately 600% from their March low and hit a record high of $3.28 earlier today. I estimate that Commonwealth Bank still owns around 7.9 million Adairs shares.

Costa Group Holdings Ltd (ASX: CGC)

A notice of change of interests of substantial holder reveals that Lazard Asset Management Pacific has been trimming down its position in this horticulture company. According to the notice, Lazard has sold just under 7 million shares over the last few weeks. Its biggest sales came on 10 August when it offloaded 4,965,372 shares for a total consideration of $14,599,540.76. This works out to be an average of $2.94 per share and reduces its stake from 7.2% to 5.45%

Once again, this appears to have been driven by profit taking after a positive performance by the Costa share price in 2020. Its shares are currently changing hands for $2.95, which means they are up 17.5% since the start of the year. Costa is scheduled to release its half year results at the end of the month. More on that here.

More reading

• Is the Commonwealth Bank share price a long-term buy?
• Earnings preview: What to expect from the Costa Group half year result
• These were the highlights of ASX reporting season last week
• Take a look at last week’s worst performing ASX shares
• Take a look at last week’s best performing ASX shares

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

The post Fund managers have been selling these ASX shares appeared first on Motley Fool Australia.

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The long-awaited initial public offering (IPO) of shares for a neobank in Australian equity markets is expected to occur as early as next week.

According to a report in the Australian Financial Review (AFR), fintech company Douugh launched a pre-listing capital raise of $750,000 via the online platform Equitise late last week.

The AFR reported that the pre-IPO funding was secured within an hour of being shared, making it the quickest crowdfunding effort seen by the Equitise platform to date. This sensational backing by investors suggests a heap of excitement around the neobank and its unique features.

What is a neobank?

For those unfamiliar, neobanks perform almost identical functions to traditional bricks and mortar banks like the big four in Australia, but do so exclusively online without physical branches.

For some people, the inability to go into your local branch and do your banking is a deal-breaker. Neobank proponents believe the inevitable cost-reduction of being purely online represents a slimmer and more profitable business model.

Many would have heard of ‘Up Bank’, which is owned by Bendigo and Adelaide Bank Ltd (ASX: BEN). Up Bank was the first neobank to hit Australia, and provided snazzy features like a bright red debit card and a decent savings interest rate of 1.5%.

These innovative features draw in millennials and younger customers who find the benefits of a local bank branch negligible and would rather choose minimal fees and maximum savings.

How is Douugh different?

According to its webpage on Equitise, Douugh is taking “a proprietary artificial intelligence (AI) first approach to disrupting the business model of banking”. This to be achieved by helping customers spend wisely, pay off debt, save more and build wealth through a smart bank account and debit card.

It is believed that Douugh and a washed-up telecommunications company already listed, Ziptel Ltd (ASX: ZIP), will in effect merge in a complex deal known as a reverse takeover. In layman’s terms, the neobank will start as Ziptel but relist almost immediately as Douugh Ltd under the ticker ASX: DOU .

Douugh is predominantly a US-focused company. It has launched its mobile app to the US app store and partnered with American institution Choice Bank. Notably, Douugh has formed a global strategic partnership with payments powerhouse Mastercard, an alliance which is potentially adding to the hype of its pre-IPO popularity among investors.

Should you invest

It is widely known that the ‘GOAT’ investor Warren Buffet has never been much of a fan of IPOs. But at the end of the day, whether you should invest boils down to if you think neobanks are the future.

On one hand, neobanks attract minimal fees for customers, provide innovative budgeting tools and lower overheads, and often facilitate higher interest rates to encourage savings.

Overall, part of me thinks neobanks are the future – that they will incrementally chip away at the market share of the big 4 banks due to their popularity among millennials. For now though, the Douugh IPO is a bit too spicy for my risk appetite so I’m staying on the sidelines a little longer.

Keep an eye on Douugh when it launches in the coming days. If it performs well, I wouldn’t be shocked to see a few more neobanks listing on the ASX in the future.

More reading

• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Bendigo and Adelaide Bank, Kogan, NAB, & Treasury Wine are dropping lower
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%
• Is the Bank of Queensland share price a better buy than Bendigo and Adelaide Bank?
• Why Bendigo and Adelaide Bank, CIMIC, James Hardie, & Webjet are storming higher

Motley Fool contributor Toby Thomas 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.

The post Should you invest in Douugh when the neobank pioneer lists on the ASX? appeared first on Motley Fool Australia.

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If I were given $10,000 to invest into ASX shares I know what I’d do with it. I would invest it today!

I’d pick these four ASX shares:

City Chic Collective Ltd (ASX: CCX) – $2,000

City Chic is a retailer of plus-size women’s clothing, footwear and accessories. It sells through a variety of different brands. It has recently acquired US brands called Avenue and Hips & Curves.

The fashion retailer sells through marketplace and wholesale partnerships with US retailers like Macys and Nordstrom. City Chic also has a wholesale business with European and UK partners such as ASOS.

The ASX share’s FY20 sales were very impressive my opinion with growth of 31% to $194.5 million. Further international acquisitions would increase company’s reach, economies of scale and build its market share.

I’d only invest $2,000 because the City Chic share price has performed so strongly. Before the start of trading this week it was trading at 22x FY22’s estimated earnings.  

Pushpay Holdings Ltd (ASX: PPH) – $2,000

Pushpay is another business that has performed very well since the start of the COVID-19 crisis.

The electronic donation business helps large and medium US churches receive money digitally. Pushpay also offers the churches a livestreaming option to stay connected with their congregations.

The ASX share is expecting that FY20 will be another very strong year. In FY20 it grew revenue by around a third. In FY21 it’s expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to between US$50 million to US$54 million.

I think we should be attracted to businesses with long-term growth runways. Pushpay is aiming for US$1 billion revenue from the US church sector.

I’d only invest $2,000 because the Pushpay share price has performed so strongly. Before the start of trading this week it was valued at 33x FY22’s estimated earnings.

Magellan High Conviction Trust (ASX: MHH) – $3,000

I think it’s a good idea to have some of the best growth shares in the world in your portfolio. Magellan High Conviction Trust is an ASX share, but it’s an listed investment trust (LIT) which is invested in some of the best businesses in the world.

It owns shares like Alibaba, Alphabet, Microsoft, Tencent and Facebook. These are technology businesses with lots of growth potential. They have high profit margins and generate their earnings from many countries. They among some of the least affected businesses by COVID-19 because of how they service customers. 

I think the large businesses that this ASX share invests in are going to perform better than the overall global share market over the longer-term.

At the current Magellan High Conviction Trust share price it’s trading at a 5% discount to the net asset value (NAV) per unit.

Citadel Group Ltd (ASX: CGL) – $3,000

I named Citadel as the ASX share I’d buy this week, it’s a technology business that provides software for clients in important sectors to manage information. Industries like healthcare, defence and education use Citadel’s software.

The company receives solid income from its contracts and it’s growing its recurring revenue, particularly after its Wellbeing Software acquisition. Wellbeing is a leading software provider in the UK with a market share of 59% and 23% of radiology and maternity software respectively. Around 70% of Wellbeing Software’s revenue is recurring with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of approximately 40%.

The ASX share is expected to steadily grow its earnings over the next few years. Before the start of trading this week it was valued at 12x FY22’s estimated earnings.

Foolish takeaway

I think all of these ASX shares can beat the overall ASX over the next 12 months and the longer-term. I like City Chic, Pushpay and Citadel, but Citadel looks the best value when you look at the expected earnings for FY22 and beyond. But the diversification of the Magellan High Conviction Trust is attractive too.

More reading

• Magellan’s top fundie Hamish Douglass names August share picks
• Why I would buy Afterpay and this quality ASX tech share
• I’d buy this ASX share this week
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• 3 five-star ASX shares to buy

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended Citadel Group Ltd and PUSHPAY FPO NZX. 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 Where I’d invest $10,000 today into ASX shares appeared first on Motley Fool Australia.

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Brokers have been quick to pass judgement on JB Hi-Fi Limited’s (ASX: JBH) profit results which sent to stock racing to a new record high today.

The JBH share price jumped 4.9% to $49.64 in after lunch trade when the S&P/ASX 200 Index (Index:^AXJO) floundered and sank 0.7%.

JB Hi-Fi Results lift all boats

The retailer posted a 33% increase in FY20 underlying net profit of A$332.7 million, which is above management’s guidance of $325 million to $330 million.

The good result lifted shares in fellow retailers too. The Harvey Norman Holdings Limited (ASX: HVN) share price rallied 4.6% to $4.29 while the Super Retail Group Ltd (ASX: SUL) share price gained 2.3% to $9.65 at the time of writing.

Cash was the big surprise in JB Hi-Fi’s results

But it may not be JB Hi-Fi’s net profit beat that’s firing up the stock. The group’s bottom line missed Goldman Sachs’ forecast by around 3% but it was the operating cash flow that the broker called a “significant surprise”.

JB’s operating cash flow came in at $819.5 million for the year, which was miles ahead of Goldman’s estimates of $360.1 million and consensus of $531.6 million.

Cash is king in this COVID-19 stricken recession and JB Hi-Fi is delivering in spades. The strong cash flow allowed the group to declare a final dividend of 90 cents a share, which again was well ahead of Goldman’s forecast of 70 cents a share.

But the strong result wasn’t enough to convince Goldman to upgrade its “neutral” rating on the stock and its price target sits at $44.40 a share.

Margin squeeze a worry

Citigroup also wasn’t impressed enough with JB Hi-Fi’s result to change its “sell” recommendation on the stock.

While there were lots to like with the group’s results, such as the better than expected performance from its Good Guys business and strong net cash position, Citi pointed to several negatives too. For instance, second half gross margins fell even as sales surged.

“A 25bps [basis point] gross margin contraction at the group level is surprising, given the lack of promotional activity in the period,” said Citi.

“While the contraction is mix-driven, we would expect underlying gross margin accretion.”

The broker also noted signs that the group is running out of stock for some products and this poses a risk to sales in the current half.

Citi’s price target on JB Hi-Fi is $42 a share.

Good news can’t last

JB Hi-Fi’s results also failed to impress Macquarie Group Ltd (ASX: MQG) as the broker held its “neutral” recommendation on the stock with a price target of $41 a share.

Like-for-Like sales at JB’s Australian chain were the standout at 12.2%, which is comfortably ahead of Macquarie’s expectation at 10.8%.

Earnings before interest and tax (EBIT) at the Good Guys division was also better than the broker’s estimates.

However, Macquarie believes the good news is already reflected in JB Hi-Fi’s current share price.

“Overall, result was ahead of expectations and July 2020 comps are well above market expectations,” said the broker.

“However, near-term risks to discretionary spend are high in our view and the impressive comps likely cannot be maintained throughout year.”

More reading

• The Starpharma share price jumps on new partnership deal
• Millennials be warned! ASIC to examine irresponsible ‘social trading’
• These 3 ASX stocks just got upgraded by top brokers to “buy” today
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Altium, Beach, JB Hi-Fi, & Starpharma shares are charging higher

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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.

The post What experts are saying about JB Hi-Fi’s profit results as the stock surges to record appeared first on Motley Fool Australia.

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The coronavirus pandemic has officially driven Australia into its first recession since 1990-91. But buy now, pay later (BNPL) shares such as Afterpay Ltd (ASX: APT) appear to be recession proof with growth in customer numbers and transactions surging since the onset of the pandemic. We take a look at how the ASX BNPL shares are outperforming on key metrics despite the economic turmoil. 

Customer numbers surge 

Each of the BNPL shares listed on the ASX has reported accelerating growth in customer numbers in 2020. Afterpay, the largest of the BNPL providers by market capitalisation, boasted 9.9 million customers at the end of FY20, a 116% increase on FY19. This included 5.6 million customers in the United States and 1 million customers in the United Kingdom, with remaining customers in the more mature Australian and New Zealand markets. 

Zip Co Ltd (ASX: Z1P), arguably Afterpay’s fiercest Australian competitor, reported 2.1 million customers at 30 June 2020. This was a 63% increase year on year, with 197,000 customers added in the June quarter. Newer BNPL shares Splitit Ltd (ASX: SPT), Sezzle Inc (ASX: SZL), and Openpay Group Ltd (ASX: OPY) also saw strong growth in customer numbers. Splitit, which allows customers to split payments into interest-free monthly installments on existing credit or debit cards, reported total shoppers of 309,000 at the end of June 2020, an 85% increase year on year. 

Sezzle, which is focused on the North American market, saw record additions of customers in the June quarter, with customer numbers growing to 326,000. Openpay, which operates in Australia, the United Kingdom, and New Zealand, saw customer numbers grow to 319,000 in the June quarter, an increase of 141% on the prior corresponding period. 

Merchant numbers climb 

At the end of FY20, Afterpay was being offered by 55,400 merchants. Sezzle reported more than 16,000 merchants at 30 June 2020 with 3,397 merchants added during the quarter, well ahead of the company’s prior record of 2,705 in 1Q20. Openpay grew active merchant numbers by 52% in the June quarter relative to the prior corresponding period, finishing the quarter with 2,162 merchants. Splitit, which processed its first transaction in 2017, listed on the ASX early in 2019 with 380 active merchants on its books across 27 countries. As at the end of June, more than 1,000 merchants were offering Splitit to customers. 

Transaction volumes leap 

Afterpay has seen transaction volumes processed using its platform surge 127% in 4Q FY20 to $3.8 billion. This brought full year underlying sales to $11.1 billion in FY20, up 112% on FY19. 

Competitor Zip Co recorded transaction volumes of $570.7 million in the June quarter (up 62% year on year). This brought annualised transaction volumes to $2.3 billion, above the $2.2 billion target. 

Splitit has also seen significant growth in transaction volumes, which surged in Q2 2020 to US$65.4 million, an increase of 176% quarter on quarter or 260% year on year. Sezzle reported underlying sales of US$188 million in the June quarter, a 57.5% increase quarter on quarter and 348.6% increase year on year. Openpay saw transaction volumes increase 119% in the June quarter, bringing full year volumes to $198.2 million, an increase of 98.2% compared to FY19. 

BNPL share prices follow 

ASX BNPL shares were heavily sold off in the March downturn. The falls were rapidly reversed as investors realised the durability of the BNPL business model and its applicability in the current economic environment. An increase in digital transacting has benefitted the BNPL providers that can assist merchants with cart conversion. An increased focus on budgeting due to the economic downturn has also increased the attractiveness of buy now, pay later solutions. 

The Afterpay share price fell to a low of $8.90 in March but has since soared to nearly $74, booking gains of over 730%. The Zip Co share price saw falls to as low as $1.18, but is currently trading at $6.16, a 422% recovery. The Sezzle share price was trading as low as 37 cents in March but is currently swapping hands at $7.59. This gives a phenomenal 1951% return to shareholders who got in at the low point. The Splitit share price is currently $1.39, but was as low as 22 cents in March, providing a 531% return. The Openpay share price dropped to 32 cents in March, but has since recovered to trade at $3.64, giving a 1038% return to the faithful that bought in at the bottom.

Global expansion on the cards 

Each of these BNPL shares is strongly focused on rapid expansion to gain market share. Afterpay is pursuing global expansion, planning to launch into Canada in Q1 FY21. Potential new markets have been identified which the company may seek to enter in 2020 or 2021. Zip Co is also looking to expand globally and recently purchased QuadPay which provides it with access to the world’s largest retail market, the United States. Zip CEO, Larry Diamond says, “The credit card model is fundamentally broken with customers demanding flexible interest-free alternatives – the flight to BNPL is indeed a global trend.”

Splitit has recently partnered with Visa and Mastercard with platform integrations progressing well. These partnerships are expected to accelerate card-based installments payments and result in increased merchant acceptance and transaction volumes. Openpay has been growing its UK business, securing a new debt facility to fund growth. Business in the UK has surged and initial trading under a major agreement with retailer JD Sports has been well above expectations. 

Sezzle recently raised nearly $80 million in capital to accelerate its growth strategy and strengthen the balance sheet. There was a strong response from shareholders to the capital raising, which resulted in allotments having to be scaled back. Funds will be used to invest in initiatives to drive long-term value creation. 

Foolish takeaway 

BNPL shares are weathering the COVID-19 storm and coming out on top. Customers are embracing flexible payment options and online transacting, fuelling growth in the market share of buy now, pay later providers regardless of recession. 

More reading

• Why Warren Buffett would never buy Afterpay shares
• Why I would buy Afterpay and this quality ASX tech share
• These are the 10 most shorted shares on the ASX
• Can these two ASX buy now, pay later companies become the next Afterpay?
• Take a look at last week’s best performing ASX shares

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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 Are BNPL shares like Afterpay officially recession proof? appeared first on Motley Fool Australia.

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Much has been made of the impact of so-called ‘Robinhood traders’ on share market performance during and after the coronavirus-induced March crash.

Robinhood, although not yet available in Australia, is the pioneer of brokerage-free share trading in the United States. A popular brokering firm, it is well-loved by millennials in particular. It boasts a slick user interface and easy access to shares, options and cryptocurrencies.

In June, I penned an article discussing how signs of dangerous millennial share trading behaviour were growing.

Today, a report in the Australian Financial Review (AFR) tells us that the corporate regulator is increasingly concerned as well.

The AFR reports that the Australian Securities and Investment Commission (ASIC) has “social media accounts in its sights” over concerns they are fuelling high-risk investing behaviour.

ASIC has noticed a significant uptick in groups on social media platforms like Facebook, Reddit and Twitter targeting inexperienced retail investors by using exaggerated claims of rapid and enriching share market gains.

Penny stocks prove popular with millennials

The AFR quotes ASIC as stating: “Social influencers and social trading are contributing to herd momentum in speculative stocks. There are a lot of scams and misinformation about products and trading strategies.”

This sentiment isn’t helped by an ASIC analysis of trades between February and June. It found that ‘new’ account holders were allocating 69% of their holdings to S&P/ASX 200 Index (ASX: XJO) shares, with another 10% going to exchange-traded funds (ETFs) and 21% to ‘other’.

In contrast, the accounts of more experienced investors showed an average allocation of 86% to ASX 200 shares, 3% to ETFs and 11% to ‘other’.

It’s this ‘other’ that has ASIC worried for the former group. It indicates that newer investors are increasingly playing the smaller end of the share trading market outside the ASX 200. These shares are often called ‘penny stocks’ and are usually classed as ‘high-risk investments’.

ASIC also noted that:

“From April 6 to June 12, there were 255 ASX-listed companies where share prices doubled, 70 companies that tripled and 29 that quadrupled. Retail investors accounted for 80% of trades of these stocks, despite comprising just 16% of broader market activity.”

Of these 255 ASX shares, ASIC also noted 80% had negative earnings in FY2019. The remaining 20% had relatively high price-to-earnings (P/E) ratios (averaging around 55).

Foolish takeaway

The conclusion? ASIC is worried, and seems to be looking at ways to curtail these kinds of activities from ‘Robinhood traders’. Whether this comes in the form of new regulations and rules, we will have to wait and see. But I would consider the spruikers of these sorts of share trading tactics to be on watch.

More reading

• These 3 ASX stocks just got upgraded by top brokers to “buy” today
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%
• Take a look at last week’s worst performing ASX shares
• Take a look at last week’s best performing ASX shares

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended Facebook. 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 Millennials be warned! ASIC to examine irresponsible ‘social trading’ appeared first on Motley Fool Australia.

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Valuations on the S&P/ASX 200 Index (Index:^AXJO) may be looking stretched during this reporting season, but this didn’t stop brokers from upgrading three ASX stocks today.

One of these upgrade candidates is from the retail sector, which has seen the JB Hi-Fi Limited (ASX: JBH) share price and Kogan.com Ltd (ASX: KGN) share price hit record highs on strong results.

There’s expectation that the Harvey Norman Holdings Limited (ASX: HVN) could be next to reach for the stars after JPMorgan lifted its rating on the stock to “overweight” from “neutral”.

Better leverage to spending

The broker is looking for retailers that are well placed during the COVID-19 fallout that aren’t being artificially bolstered by temporary support measures. These include government wage supplements that have an expiry date and one-off withdrawals from superannuation.

“Rather, retailer success has been due to lower spending in other consumption categories,” said JPMorgan.

“This is expected to drive strong FY20 results with trading to start 1H21 to be strong, and while Melbourne Stage 4 lockdown is a negative, the size overall is modest.”

The broker upgraded Harvey Norman due to its operating leverage and exposure to the housing market. JP Morgan’s price target on the stock is $4.75 a share.

Too cheap to ignore

Another stock to get upgraded is the Metcash Limited (ASX: MTS) share price. Credit Suisse upped its call on the grocery distributor to “outperform” from “neutral” as it noted the stock is trading at a big discount to the Woolworths Group Ltd (ASX: WOW) share price.

This is unjustified as many of the tailwinds from COVID-19 that are lifting Woolies applies to Metcash.

“With macro factors expected to support expenditure on food retail and localised shopping behaviour continuing at least for the near term, Metcash is likely to experience mid-to-high single digit underlying sales growth,” said the broker.

“The near-term impact from Melbourne’s stage 4 restrictions is low as only 1% of Mitre 10 and Home Timber and Hardware stores are based in the Melbourne metropolitan region.”

Credit Suisse’s 12-month price target on Metcash is $3.47 a share.

Expanding upside

Meanwhile, the recent pullback in the Breville Group Ltd (ASX: BRG) share price prompted Goldman Sachs to lift its recommendation on the stock to “buy”.

The broker believes the market isn’t fully appreciating the earnings growth potential for the kitchen appliance maker after it posted a profit result that was ahead of Goldman’s expectations.

“BRG continues to extend its runway for growth as it expands into new geographies (Italy, Portugal and Mexico were confirmed for FY21),” said the broker.

“Our analysis shows that if BRG were to achieve 50% of the relative market penetration it has in the ANZ market in North American and European markets, we estimate its EBIT potential could be 78% higher than our current FY23E EBIT forecast.

“And if BRG achieved 100% of the relative market penetration of ANZ, its EBIT potential could be 217% higher.”

The broker’s 12-month price target on Breville is $30.35 a share.

More reading

• Millennials be warned! ASIC to examine irresponsible ‘social trading’
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Bendigo and Adelaide Bank, Kogan, NAB, & Treasury Wine are dropping lower
• Why Altium, Beach, JB Hi-Fi, & Starpharma shares are charging higher
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%

Brendon Lau owns shares of Breville Group Ltd and Woolworths Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended 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.

The post These 3 ASX stocks just got upgraded by top brokers to “buy” today appeared first on Motley Fool Australia.

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