Tag: Motley Fool

The Commonwealth Bank of Australia (ASX: CBA) share price is back over the $100 mark in early trade on Wednesday.

The $169 billion S&P/ASX 200 Index (ASX: XJO) giant plummeted 7% over the course of September – known to be the worst month for markets. It’s since picked itself up by the bootstraps, lifting 10% so far this month.

The CBA share price closed at $99.78 on Tuesday and, at the time of writing, is $100.69, a rise of 0.91%.

But with such a recovery under its belt, does the banking giant’s stock still offer investors upside?

Is now a good time to buy CBA shares?

CBA is the ASX 200’s biggest bank and a resoundingly popular share. But optimistic experts are few and far between.

JP Morgan is said to believe the banking giant “offers the best leverage to rising rates and has the most defensive loan book”. For that reason, the broker commented:

We struggle to see CBA underperforming its peers meaningfully.

Rate hikes, like the six implemented by the Reserve Bank of Australia (RBA) this year, let banks reprice their loan offerings, thereby increasing their net interest margins (NIM) and, in turn, their profits. Though, rising rates also bring risks for banks’ loan books.

On a less positive note, CBA is JP Morgans’ least preferred ASX 200 bank, as my Fool colleague Bronwyn reports.

Turning to other brokers, Credit Suisse had a $102.80 price target and a neutral rating on the biggest bank’s stock late last month, my colleague James reports. That represents a potential 3% upside.

The broker also expects CBA to grow its dividends, tipping it to pay out $4.25 per share in financial year 2023. That would mark a 10% increase on the $3.85 per share CBA paid in financial year 2022.

Turning to the bears, Goldman Sachs rates the stock a sell while Morgan Stanley is said to have slapped it with an $85.50 price target, according to Livewire, representing a potential 14% downside.

Morgan Stanley is also said to be sceptical of the entire banking sector, expecting rate hikes and fiscal consolidation to continue for longer than previously predicted.

Finally, as my Fool colleague Zach covered in depth yesterday, CBA is both the most profitable ASX 200 bank share and the most expensive. It’s trading with a price-to-earnings (P/E) ratio of around 18.

The post CBA shares: Buy, hold, or fold? appeared first on The Motley Fool Australia.

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More reading

• Is it time for ‘cashing in some gains’ on Pilbara Minerals shares?
• 3 ASX 200 companies among the top 10 lithium producers in the world
• 5 things to watch on the ASX 200 on Wednesday
• Why was the Fortescue share price on such a rollercoaster today?
• Here are the top 10 ASX 200 shares today

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs and JPMorgan Chase. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Origin Energy Ltd (ASX: ORG) share price has started the day positively.

In morning trade, the energy company’s shares are up 1% to $5.78.

Why is the Origin share price rising?

Investors have been bidding the Origin share price higher today after the company released energy markets earnings guidance for FY 2023 and FY 2024.

As a reminder, the company was previously guiding to energy markets underlying EBITDA of $600 million to $850 million for FY 2023. However, this guidance was withdrawn in June due to “material developments in global and Australian energy markets.”

It revealed that challenges with coal delivery to Eraring Power Station were expected to persist and result in a material increase in coal purchasing costs.

The good news is that trading conditions have improved meaningfully since June. And while it isn’t enough for its previous guidance to be reinstated in full, the top end of its new guidance range is within the old range.

Management expects energy markets underlying EBITDA to be $500 million to $650 million in FY 2023. This will be up 37% to 78% on FY 2022’s segment earnings.

This has been driven by an expected increase in natural gas gross profit, which is offsetting suppressed electricity gross profit due to higher energy costs only being partially priced into regulated tariffs.

Origin also advised that it has contracted 4.4 million tonnes of coal of a targeted 5 to 6 million tonnes and expects to reach its target by the end of the 2022 calendar year.

FY 2024 guidance

Also giving the Origin share price a lift is management’s commentary on FY 2024.

Although it hasn’t provided any concrete guidance, it advised that it “anticipates further growth in Energy Markets Underlying EBITDA.”

A higher contribution is expected from the electricity business as higher wholesale electricity prices flow through to customer tariffs. Though, it warned that electricity earnings are subject to coal contracting outcomes.

It also advised that the implementation of Kraken Origin is expected to deliver on the targeted $200 million to $250 million cash cost savings from an FY 2018 baseline.

The post Origin share price higher on earnings guidance update appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Jumbo, Origin, Qantas, and Woodside shares are racing higher
• Here are the top 10 ASX 200 shares today
• What’s the outlook for ASX 200 mining shares in Q2?
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Whitehaven Coal Ltd (ASX: WHC) share price has come under pressure on Wednesday.

In morning trade, the coal miner’s shares are down 7% to $9.67.

Why is the Whitehaven Coal share price Z?

Investors have been selling down the Whitehaven Coal share price in response to the company’s first quarter update.

According to the release, the company’s first quarter managed run-of-mine (ROM) production came in at 4Mt. This was down 37% on the June quarter and 22% on the prior corresponding period.

Management advised that this reflects a strong operational performance at the Narrabri underground mine, which was offset by significant wet weather and flood impacts on its open cut operations.

This weak production is particularly disappointing given that Whitehaven Coal was commanding a record average coal price of $581 per tonne for the quarter. It also meant that first quarter managed sales of produced coal were down 31% to 3.7Mt.

Nevertheless, the company still generated material cash of $1.55 billion during the quarter. This took its net cash position to $1.93 billion at the end of September.

Management commentary

Whitehaven Coal’s CEO, Paul Flynn, commented:

With demand for high quality coal continuing to outstrip global supply, coal prices set another record in the September quarter and continue to be well supported.

We delivered strong operational performance in the September quarter at our Narrabri underground mine but our open cut operations were impacted by wet weather and flood related road closures in September. With La Niña forecast to be a feature through the Spring season, we have been working constructively with councils and developing measures to minimise the impacts of weather delays and flood related road closures as much as possible.

Whitehaven generated $1.55 billion of cash in the September quarter and we have a net cash position of $1.93 billion at 30 September. The Company is performing well for the benefit of all of our stakeholders, and Whitehaven is extremely well placed to continue to support energy security for our customers and to deliver strong returns for our shareholders.

Outlook

Pleasingly, despite La Niña impacts and labour constraints, management notes that the company remains on track to deliver within the range of its production, sales, and cost guidance for FY 2023.

This is thanks largely to mine sequencing plans which allow for opportunities to lift volumes throughout the year.

Management ROM production guidance remains 20Mt to 22Mt, wiwth managed coal sales of 17.5Mt to 18.5Mt, and unit costs of $86 to $96 per tonne.

The post Whitehaven Coal share price sinks 7% on Q1 disappointment appeared first on The Motley Fool Australia.

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More reading

• Why Adbri, Rio Tinto, St Barbara, and Whitehaven Coal shares are dropping today
• Whitehaven Coal shares: Buy, hold, or fold?
• Missed the boat on Whitehaven shares? This other ASX coal share ‘screams value’: expert
• Here are the top 10 ASX 200 shares today
• Why has the Whitehaven share price already dived 7% so far this week?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by 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.

The Nasdaq Composite has plunged deep into bear market territory, dragged down by deteriorating investor sentiment in the face of high inflation and rising interest rates. In fact, the tech-heavy index is now 34% off its high, marking its steepest decline in the last decade.

On the bright side, that broad downturn has created a wealth of buying opportunities for patient investors. For instance, in spite of temporary macroeconomic headwinds, the future looks bright for Microsoft (NASDAQ: MSFT) and Arista Networks (NYSE: ANET), and both stocks are trading at discounted valuations compared to historical price-to-earnings multiples.

Microsoft: An arsenal of critical software and cloud services  

Microsoft breaks its operations into three segments, each packed with widely adopted products. The first is Productivity and Business Processes, at the heart of which is Microsoft 365, the most popular collection of enterprise applications on the planet. In addition to the well-known Office software suite, Microsoft 365 includes market-leading products like Defender and Azure Active Directory for cybersecurity, and Microsoft Teams for communications.

The second segment is Intelligent Cloud, which houses Microsoft SQL Server, the third-most-popular database. But cloud computing platform Microsoft Azure is the heart of this segment. Azure captured 21% market share in cloud infrastructure services in the second quarter, second only to Amazon Web Services. 

The final segment is More Personal Computing, which features Xbox hardware and content, the ubiquitous Windows operating system, and the Bing search engine. But the most exciting part of this segment is advertising. Last year, Microsoft acquired ad tech platform Xandr from AT&T, and Netflix recently selected Microsoft as the ad tech vendor that will power its soon-to-launch ad-supported streaming service.

Broadly speaking, Microsoft’s arsenal of critical software products and cloud services makes it resilient, and that advantage has helped the company churn out solid financial results in spite of the difficult economic environment. Over the past year, revenue rose 18% to $198 billion, while free cash flow ticked up 16% to $65 billion. But Microsoft still has room to expand, especially in cybersecurity, cloud computing, and digital advertising.

In fact, the cybersecurity market will grow 12% annually to reach $500 billion by 2030, while the cloud computing market will grow 16% annually to reach $1.5 trillion, according to Grand View Research. Meanwhile, online video advertising spend will increase 14% annually to reach $362 billion by 2027, according to Omdia. Netflix is expected to be a key player in that market, which bodes well for Microsoft.

Currently, Microsoft stock is 32% off its high, and shares trade at 23.7 times earnings, a bargain compared to its five-year average of 35.1 times earnings. That’s why investors may regret passing on this growth stock.

Arista Networks: Technology that powers the cloud

Arista has become the gold standard in high-speed data center networking. Its portfolio includes switching and routing platforms, wireless access points, and adjacent software for network automation, monitoring, and security. Those technologies allow customers to deploy a seamless network across public clouds, private clouds, and enterprise campus environments.

Arista says its principal innovation is the Extensible Operating System (EOS), the uniquely programmable software that runs across every piece of its hardware. That programmability makes Arista’s networking platforms very flexible, allowing customers to easily integrate and deploy third-party applications. Additionally, by running a single version of EOS across every switch and router, Arista makes network management less complex and costly compared to vendors like Cisco, which requires customers to run different versions of multiple operating systems across its hardware.

In short, Arista’s networking platforms offer industry-leading speed and power efficiency at a lower total cost of ownership. Those selling points have helped it win more than 8,000 customers, including cloud computing giants like Microsoft and Meta Platforms. In turn, Arista has delivered solid financial results on a relatively consistent basis. Revenue climbed 33% to $3.5 billion over the past year, and earnings soared 41% to $3.24 per diluted share.

Looking ahead, Arista is well positioned to maintain that momentum. Data centers will need faster networks to support the ongoing adoption of cloud computing, the growing number of connected devices (e.g. the Internet of Things), and the development of data-intensive applications (e.g. artificial intelligence). That should drive demand for Arista’s networking products in the coming years. In fact, management says its addressable market will grow from $23 billion in 2021 to $35 billion by 2025.

Currently, Arista stock is down 27% from its high, and shares trade at 30.8 times earnings, a slight discount to its three-year average of 33.5 times earnings. That’s why this growth stock looks like a buy right now. 

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

The post Nasdaq bear market: 2 magnificent US growth stocks you’ll regret not buying on the dip appeared first on The Motley Fool Australia.

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More reading

• Why Warren Buffett loves this US stock
• This stock market investment strategy made money 100% of the time over the last century
• Following this streaming strategy could pay off big for Microsoft
• Here’s why splitting up Amazon could mean huge returns for shareholders
• Microsoft just hiked its dividend. Who’s next?

Trevor Jennewine has positions in Amazon and Arista Networks. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Arista Networks, Cisco Systems, Meta Platforms, Inc., Microsoft, and Netflix. The Motley Fool Australia has recommended Amazon, Arista Networks, Meta Platforms, Inc., and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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

What happened

Shares of Tesla (NASDAQ: TSLA) were up as high as 4.8% this morning before cooling off by the afternoon. By market close, the stock had still managed to hold a 0.38% gain on the day, slightly trailing the broader market. Year to date, the stock has fallen 37%.

Wolfe Research released its findings on the potential impact of the electric vehicle incentives included in the Inflation Reduction Act. Plus, Tesla is looking to add almost 7,000 jobs, despite weakening auto sales across the industry year to date.

So what

Wolfe Research analyst Rod Lache said that the Inflation Reduction Act (IRA) could benefit the larger EV makers such as Tesla. A week ago, Goldman Sachs labeled Tesla and General Motors as its favorite picks in the auto space due to the catalysts with the IRA.

It’s also a positive indicator for Tesla’s near-term demand that it is looking to hire thousands of employees. The job listings reportedly represent a 50% jump from June. Most of the job openings are spread across its factories in the U.S., with over 200 openings listed for its China factory in Shanghai.

Now what

Tesla said that it delivered over 343,000 vehicles in the third quarter, which missed estimates and sent the stock down at the start of October. Investors initially saw the delivery miss as a sign that Tesla’s demand was plunging with the rest of the industry.  But it noted that there were cars still in transit at the end of September that skewed the delivery total downward.

Investors will get more clarity on demand when Tesla reports third-quarter results on Wednesday 19 October.

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

The post Why Tesla stock was surging at the market open today appeared first on The Motley Fool Australia.

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More reading

• Tesla and Netflix will make or break the Nasdaq this week
• Why Tesla shares started trading this week up 8%
• How does Tesla make money?
• Queensland Pacific Metals share price soars 18% on General Motors deal
• Why Tesla stock fell today

John Ballard has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The BHP Group Ltd (ASX: BHP) share price will be one to watch on Wednesday.

This follows the release of the mining giant’s first quarter update this morning.

BHP share price on watch following Q1 update

Much like rival Rio Tinto Limited (ASX: RIO) yesterday, BHP’s production appears to have fallen short of expectations during the last quarter.

For the three months ended 30 September, BHP reported copper production of 410.1kt. This was down 11% from the June quarter and short of the consensus estimate of 429kt.

Management advised that lower volumes at Escondida were due to lower concentrator feed grade, lower ore stacked in prior months at Pampa Norte reducing cathode production, and lower volumes at Olympic Dam as a result of planned refinery maintenance.

BHP’s iron ore production for the quarter came in 1% higher at 65.1Mt. However, despite this growth, it will have been hard for the company to achieve the consensus shipments estimate of 72.3Mt for the three months.

Management advised that the strong operational performance at WAIO was partially offset by planned car dumper maintenance in the quarter.

Given the sky high prices that coal is commanding right now, the market may be disappointed to learn that significant wet weather weighed on its production during the quarter.

Metallurgical coal production was down 19% to 6.7Mt (versus consensus est. 7.6Mt) and energy coal was down 33% to 2.6Mt.

Finally, the company’s nickel production came in at 20.7Mt. While this was up 10% quarter on quarter, it was still a touch short of the consensus estimate of 21.1Mt.

Management commentary

BHP’s chief executive officer, Mike Henry, was pleased with the company’s start to the new financial year. He commented:

We have started the new financial year strongly, achieving safe and reliable operating performance. The first quarter included significant planned major maintenance in Western Australia Iron Ore (WAIO), BHP Mitsubishi Alliance (BMA), and Olympic Dam.

Copper production was up nine per cent on the same quarter last year, with strong concentrator throughput at Escondida and record quarterly anode production at Olympic Dam. WAIO continued to perform strongly, with production up by 3% relative to the same period last year, and we managed through substantial rainfall and labour constraints in our coal assets with production only down marginally year on year.

Outlook

One positive that could support the BHP share price today is that management has reaffirmed all production and cost guidance for FY 2023.

For example, iron ore production guidance remains 249Mt to 260Mt, copper production remains 1,625kt to 1,825kt, and met coal production guidance remains 58Mt to 64Mt.

Henry concludes:

We expect global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability. BHP remains well positioned, with a portfolio and balance sheet to withstand external challenges and a strategy positioned to benefit from the global mega-trends of decarbonisation and electrification.

The post BHP share price on watch amid Q1 production miss appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Is it wise to buy BHP shares amid falling iron ore prices?
• Why did the BHP share price melt down on Monday?
• Opportunities across the mining sector: Expert names ASX 200 shares to buy
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking to boost your income portfolio this month, then you may want to look at the shares listed below that Morgans rate as buys.

Here’s why these ASX dividend shares could be worth considering right now:

HomeCo Daily Needs REIT (ASX: HDN)

The HomeCo Daily Needs REIT could be an ASX dividend share to buy.

It is a property company that invests in convenience-based assets across the target sub-sectors of Neighbourhood Retail, Large Format Retail and Health & Services. It does this with the aim of providing shareholders with consistent and growing distributions.

The team at Morgans appears to believe it is well-placed to deliver on this due partly to its significant development pipeline. The broker highlights that this development pipeline is valued at over $500 million and should underpin solid future growth.

As for dividends, the broker is forecasting dividends per share of 8.3 cents in FY 2023 and 8.7 cents in FY 2024. Based on the current HomeCo Daily Needs share price of $1.18, this will mean dividend yields of 7% and 7.4%, respectively.

Morgans has an add rating and $1.56 price target on its shares.

Macquarie Group Ltd (ASX: MQG)

Another ASX dividend share that could be in the buy zone according to Morgans is investment bank Macquarie.

Morgans likes Macquarie due to its exposure to long-term structural growth areas such as infrastructure and renewables. Its analysts also see potential for the bank to benefit from recent market volatility through its trading businesses and win market share in Australian mortgages.

In respect to dividends, Morgans is expecting partially franked dividends of $7.07 per share in FY 2023 and $7.47 per share in FY 2024. Based on the current Macquarie share price of $162.32, this will mean yields of 4.3% and 4.6%, respectively.

Morgans has an add rating and $215.00 price target on the company’s shares.

The post Broker says these ASX dividend shares are buys this month appeared first on The Motley Fool Australia.

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More reading

• Down 7% in a month, is the Macquarie share price an ASX 200 bargain buy?
• Brokers say these top ASX dividend shares are buys right now
• Here are the top 10 ASX 200 shares today
• What’s the outlook for ASX 200 bank shares in Q2?
• A mortgage ‘battleground’ is coming. UBS names ASX 200 bank shares best placed to win

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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Lithium, as a primary ingredient in high-powered batteries, is crucial for the world’s transition to a reduced-carbon future.

The element is valuable because it’s not easy to substitute it with something else.

“The reason for the hype is [that] lithium has unique characteristics that are difficult to replicate,” said Shaw and Partners portfolio manager James Gerrish back in June.

“It is a light metal but is able to store large amounts of energy and is an excellent conductor of electricity.”

And many experts predict that for the next few years, the increasing demand will far outstrip what mining companies can dig out of the ground.

“Demand for lithium has grown at [approximately] 20% compound annual growth rates through 2017 to 2022 and we think that will continue, while lithium deposits that are technically and economically viable to exploit are rare.”

This is why any ASX shares that have anything to do with lithium production have been in hot demand the past couple of years.

The biggest lithium producers on the ASX

But this also means there are many companies out there that are exploring for lithium and not actually producing any yet.

It takes many years to find mineral deposits then process all the paperwork and get the infrastructure set up to actually dig the stuff out of the ground.

Hence, many experts have warned investors to stay away from ASX shares that represent explorers because of the highly speculative risks involved.

The larger companies that are already producing lithium from established deposits will be more stable and reliable for shareholders.

So which ones are they?

Helpfully, Visual Capitalist this month published a top 10 league table of global lithium producers, and three S&P/ASX 200 Index (ASX: XJO) were featured.

This means that these are the biggest lithium producers you can get your hands on on the ASX at the moment.

With a market capitalisation of $13 billion, Mineral Resources Limited (ASX: MIN) came in at number five.

The Motley Fool reported last week that analysts at Citi rate Mineral Resources as a buy.

“Citi recently attended a presentation relating to Mineral Resources’ Mt Marion and Wodgina lithium operations,” wrote The Motley Fool’s James Mickleboro.

“Following the presentation, the broker remains very bullish and is expecting these lithium operations to generate over three-quarters of its earnings in FY 2023.”

Not far behind is Pilbara Minerals Ltd (ASX: PLS), coming in at sixth, and Allkem Ltd (ASX: AKE), sitting in seventh position.

According to Macquarie analysts, Allkem has the higher upside of the two.

Although they rate both as a buy, The Motley Fool reported that Allkem has a price target of $21 and Pilbara’s $5.60. This makes the former a better proposition in relation to their current stock prices.

It seems the ASX is the place to be when seeking lithium investments.

According to Visual Capitalist, Australia has the largest annual production, extracting 55,000 metric tons each year.

“Four mineral operations in Australia, two brine operations each in Argentina and Chile, and two brine and one mineral operation in China accounted for the majority of global lithium production in 2021.”

The post 3 ASX 200 companies among the top 10 lithium producers in the world appeared first on The Motley Fool Australia.

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More reading

• Is it time for ‘cashing in some gains’ on Pilbara Minerals shares?
• 5 things to watch on the ASX 200 on Wednesday
• Why was the Fortescue share price on such a rollercoaster today?
• Here are the top 10 ASX 200 shares today
• Could investors in this ASX 200 share be in for more payment windfalls?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pilbara Minerals Ltd (ASX: PLS) share price has exploded in the past year.

Shares in the pure-play lithium company have surged 125% in the last 52 weeks to $4.80 apiece as at Tuesday’s market close.

So is now a good time to sell, or is it better to hold Pilbara Minerals shares?

Hold or sell?

Pilbara operates the Pilgangoora Project near Port Hedland in Western Australia. This is regarded as one of the biggest hard rock lithium deposits in the world.

Red Leaf Securities CEO John Athanasiou recently recommended investors “sell” Pilbara Minerals shares, citing the company’s recent gains. Commenting on The Bull, he said:

The company’s been benefiting from higher lithium prices.

In fiscal year 2022, the company generated sales revenue of $1.2 billion, a 577 per cent increase on the prior corresponding period. Investors may want to consider cashing in some gains.

Meanwhile, UBS recently rated the Pilbara share price as a sell with a $2.65 price target, my Foolish colleague Tristan reported.

On the flipside, Macquarie placed a $5.60 price target on Pilbara shares in September, as reported by my Foolish colleague James.

A recent federal government report forecasted lithium prices to rise in 2023 before easing in 2024.

In news on Tuesday, Pilbara updated investors on its latest Battery Material Exchange (BMX) auction. The company has accepted a pre-auction offer of US$7,100 per dry metric tonne (dmt) for a shipment of 5,000dmt of spodumene concentrate in mid-November.

Pilbara is also due to release a quarterly activities report next Tuesday.

Share price snapshot

Pilbara shares have soared almost 50% year to date, however, they are down 4% in the past week.

For perspective, the S&P/ASX 200 (ASX: XJO) has fallen 8% in the past year.

Pilbara has a market capitalisation of about $14.2 billion based on the current share price.

The post Is it time for ‘cashing in some gains’ on Pilbara Minerals shares? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 companies among the top 10 lithium producers in the world
• 5 things to watch on the ASX 200 on Wednesday
• Why was the Fortescue share price on such a rollercoaster today?
• Here are the top 10 ASX 200 shares today
• Could investors in this ASX 200 share be in for more payment windfalls?

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s been a rough year for investors of small-cap ASX shares.

“All types of investing require nerve and courage. But perhaps none more so than small-cap stocks,” said Ophir analysts in a memo to investors this month.

“When an economic downturn hits, small caps tend to fall first and farthest.”

In volatile and uncertain times, the value of smaller companies sinks much more dramatically than larger companies for multiple reasons.

“Small caps also tend to be more sensitive to changes in the economy. They are less able to diversify their operations and are less likely to have the large cash reserves needed to withstand difficult trading conditions.”

They can also get caught up in a liquidity spiral. In a falling market, institutional investors often sell out of smaller holdings first to avoid getting trapped in an illiquid position.

“They then also stop buying, pushing prices down further and faster on even lower levels of liquidity,” read Ophir’s investment strategy memo.

“And while small-cap managers might see even cheaper stocks, many are unwilling to enter the market so prices in small-cap stocks keep falling at a faster rate.”

But the reward for hanging onto the small fish is that, on the other side, they rally much faster than large caps.

“Historically, in the 12 months after the US small-cap index has bottomed around a recession, they have returned an incredible 70% on average – that’s 11% higher than large caps,” read the Ophir memo. 

“The small-cap rebound is also quick. Most of the additional return benefit versus large caps has happened in the first three months.”

So remembering this, here are three small-cap ASX shares that the Cyan C3G Fund is holding onto despite being absolutely hammered last month:

Rock solid investments for the inevitable small-cap recovery

The Mighty Craft Ltd (ASX: MCL) share price tumbled more than 21% in September, but the Cyan team is not worried.

“The alcohol industry globally is dominated by a handful of powerful players, but the domestic industry has been growing strongly in recent years,” read Cyan’s memo to clients.

“We think it’s a sector worth being exposed to and Mighty Craft is our preferred business model, whereby they acquire and accelerate growing beer and spirits brands through provision of capital, distribution and retail and wholesale points of presence.”

The nature of the industry means Mighty Craft could become an attractive takeover target.

“Inevitably the successful domestic businesses or alcohol brands are acquired as they obtain, or are on a clear path to obtaining, reasonable market share.”

Melbourne video games developer Playside Studios Ltd (ASX: PLY) is another small-cap Cyan analysts are backing, despite a 14.3% drop in valuation last month.

“This gaming business continues to impress with the execution of its growth strategy through a business model based on work-for-hire, original IP development and new initiatives like a third party publishing division,” read the memo from Cyan.

“In short, an exceptional team with a strong and growing business in a strong and growing industry.”

The heavy discounting in its shares means it’s another potential takeover subject.

“We believe Playside can deliver great returns to shareholders independently or as an M&A target in time (hopefully both),” said the Cyan portfolio managers. 

“We see this as a unique opportunity to get exposure to these dynamics in the ASX listed space.”

The Cyan team has been a longtime fan of hospital software maker Alcidion Group Ltd (ASX: ALC).

And that hasn’t changed despite a 12.1% drop in share price in September.

“Alcidion is building a strong position in the digitisation of hospital management systems, both administrative and clinical, in Australia and the much larger UK market.”

The business raked in $34 million in revenue for the 2022 financial year. Its June quarter revenue was 46% up year on year.

“The company has worked hard to become one of the leading providers and the timing looks perfect to scale the business significantly over the next two years as governments drive the push towards technology in healthcare in a post-COVID environment.”

The post 3 battered small-cap ASX shares we’re still backing: expert appeared first on The Motley Fool Australia.

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More reading

• Top fund manager thinks ASX could start to move decisively higher, potentially sooner than you might be expecting
• Experts say these small cap ASX shares are buys

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alcidion Group Ltd. The Motley Fool Australia has recommended Alcidion Group Ltd. 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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