ASX News Live | ASX Steadies; ANZ, Amcor, CSL, Nearmap, Redbubble, Santos Release Results

The S&P/ASX 200 recovered in late afternoon trade after falling into negative territory at midday.

The benchmark index is currently up 0.25%, led by Super Retail Group, City Chic Collective, and Challenger, all three up over 4%.

In March 2009, a group of reporters and car enthusiasts gathered up in Hawthorne, California, for the presentation of a new car.

The company doing the unveiling was relatively small. It only had one car model on the roads, a US$109,000 sports car, of which it had only sold 250 units.

Although still a luxury car, the model the company was unveiling that day was a cheaper sedan that could go from 0 to 60 in less than six seconds.

The company had huge ambitions for their new car.

As the CEO mentioned that day, the sedan was set to make history by playing a similar role in reshaping the auto industry, just as the Ford Model T did in its day.

As he said:

‘This is one of the most historic cars. We are trying to accelerate the EV revolution and get us off oil.’

If you haven’t guessed it yet, the company is Tesla, and the car is the Tesla Model S.

Musk wanted to have the Model S hit the roads by the third quarter of 2011 and to build 20,000 of them a year.

But the truth was that the company was struggling to get financing.

This was just after 2008, and money was scarce.

‘We can’t move forward with that without a major amount of capital,’ he had said during an interview just a few months before.

But talk about being in the right place at the right time…

Only a month before the unveiling of the Tesla S, US President Obama had signed the American Recovery and Reinvestment Act, a stimulus package that would drive US$800 billion into the economy…and that included US$90 billion to promote green energy.

Dubbed the ‘biggest energy bill in history’, the stimulus helped push companies like Tesla, which got a US$465 million loan from the Department of Energy to design and build electric cars.

Today, Tesla is a US$900 billion company, manufacturing close to a million electric cars per year.

Yet Obama’s stimulus also boosted more than 100,000 renewable energy projects across the country. It established large-scale solar and wind farms and lowered power costs. In fact, the stimulus doubled solar and wind capacity in the US in just four years.

Now, last night, Biden signed the Inflation Reduction Act into law…

Dubbed as the ‘boldest climate package in history’, the landmark bill allocates US$369 billion to clean energy. This is four times the amount brought in by Obama and the largest clean energy investment in US history to date.

Its effects have already been flowing into all sectors of the US clean energy economy: wind, solar, hydrogen, cleantech, batteries, to name a few…

Yet the climate bill has also been pushing ASX lithium stocks.

Read full article here.

https://www.moneymorning.com.au/20220817/lithium-stocks-soarand-should-continue-to.html

Redbubble is currently down 39% after revealing it turned last year’s net profit of $31.2 million into a net loss of $24.6 million.

The $55.8 million turnaround is partly explained by a 12.8% decline in total revenue, which fell from $657.3 million to $573.4 million.

What is Redbubble’s moat?

In its FY22 report, Redbubble shared a bio of one of its featured artists who use the platform.

Rosie Sayers, the featured artist, said:

“I have sold my artwork exclusively on Redbubble since 2017 because Redbubble takes the stress out of owning a shop for me. It saves me hours of time and money as I don’t have to pack and ship orders myself, or pre-order stock. The marketplace is easy to navigate for sellers and buyers and the quality and range of the products is outstanding.”

And while Sayers has used Redbubble exclusive for five years, does Redbubble possess a durable business moat?

Artists can sell their art via platforms like Shopify and Etsy or via the traditional heavyweights Amazon and eBay.

Mask sales plunge

Redbubble said revenue was materially affected by a steep drop in sales of custom designed masks.

“It should be noted that the Group’s year on year growth rates were materially impacted by the $55 million of mask sales that occurred in FY2021. Mask sales in FY2022 were $10 million. On an underlying basis (excluding both mask sales and statutory delivery date adjustments to revenue), underlying Marketplace Revenue for FY2022 was down 2.6% from the prior year.”

Redbubble’s wobbling flywheel

In its FY21 report, RBL described the Redbubble ‘flywheel’.

Encouraging artists to use the platform “inspires them to create more unique content” while “customer acquisition and loyalty reinforces our competitive position”.

But is the value primarily driven by artists — whose products drive customer growth? Or is the value primarily driven by getting more customers to use the platform?

In FY21, Redbubble counted 9.5 million unique customers spending $701 million gross transaction volume.

In FY22, that fell to 8.3 million unique customers spending $630 million in gross transaction value.

And while selling artists rose from 728,000 to 809,000, artist revenue fell from $104 million to $91 million.

It seems that driving customer growth is more important than driving artist adoption.

Marketing expenses rose in FY22 from $73 million to $80 million, despite a drop in unique users.

But Redbubble remains positive about its flywheel gaining momentum, writing in FY22 report:

“It is a flywheel because the greater number of artists in the marketplace, the higher the volume of relevant content which creates more reasons for customers to come to the marketplace. More customers enables the fulfilment network to scale, lowering costs and improving services, thus attracting additional customers. With more customers, comes more artist revenue, encouraging new artists to the platform adding more content and the cycle continues.”

Online marketplace firm Redbubble Ltd [ASX:RBL] is down over 30% on Wednesday after it reported a net loss of $24.6 million, down from a net profit of $31.2 million in FY21.

RBL’s bottom line trending in the wrong direction has led to an investor exodus as the market is currently discounting Redbubble’s outlook in a big way.

 

Lithium stocks are being sold off on Wednesday, with Lake Resources and Sayona Mining notching the largest falls in morning trade.

• Lake Resources is down 12%
• Sayona Mining is down 10%
• Vulcan Energy is down 8%
• Ecograf is down 8%
• Core Lithium is down 6.5%
• Novonix is down 6.5%
• Galan Lithium is down 5.5%
• Liontown Resources is down 5%

 

Lithium stock Lake Resources is under selling pressure this week, down around 25% since hitting $1.60 on August 11.

Currently, LKE shares are down 12% as investors look to take profits and exit the trade.

 

As reporting season ramps up this month, it’s a good time to revisit debates about what holds more weight in assessing a stock’s long term outlook — profit or cash.

As companies continue to release their full year results, most of attention gravitates towards the bottom line of the income statement.

Has this firm made a profit? Have its earnings grown? Is the profit margin healthy?

Less attention is paid to cash. How much cash is the firm generating from operations? Is it free cash flow positive?

Analysts and finance scholars have debated the usefulness of cash over profit for years.

Back in 1998, Alfred Rappaport, in his book Creating Shareholder Value, proclaimed that ‘cash is a fact, profit is an opinion.’

Rappaport argued that cash is harder to massage than accounting profit that relies on accounting conventions and assumptions more prone to adjustment.

This can lead to major discrepancies between reported profit and reported cash flow.

In a research note, respected financial analyst Michael Mauboussin wrote that the difference between earnings and cash flow is ‘significant’.

Studying Dow Jones Industrial Average data, Mauboussin and colleagues found:

“The range of cash flow/earnings ratio within the DJIA fluctuated from negative 0.08 to positive 2.6.

“This means that earnings and P/E comparisons can be highly misleading because they do not offer insight into a business’s underlying economics.”

1/ You find a lamp and after you rub it a genie appears and offers you one of two businesses:

1. Business A generates $10,000 in "earnings" each month;

Or

2. Business B generates $10,000 in "free cash flow" each month?

Would you select Business A or Business B?

— Tren Griffin (@trengriffin) July 11, 2021

In an earnings call, the chief financial officer of Walmart admitted the giant retailer cancelled ‘billions of dollars’ in orders to ‘right size’ its inventory.

That said, Walmart’s latest quarter results released yesterday came in ahead of analyst expectations.

Same-store sales grew 6.5% year on year while revenue rose 8.4% to US$152/86 billion.

Walmart CFO John David Rainey thinks the US consumer is doing OK despite high inflation:

“I certainly don’t want to say the consumer is strong, but they are relatively OK.”

Telling comments from Walmart on earnings call:
*WALMART HAS CANCELED ‘BILLIONS OF DOLLARS’ IN ORDERS, CFO SAYS
*WALMART CFO SEES NEW PRICE CUTS ON SOME GOODS TO PARE INVENTORY

— Liz Ann Sonders (@LizAnnSonders) August 16, 2022

The S&P/ASX 200 opened lower on Wednesday as the market digests a big serving of company results.

Domain and CSL were the worst performing stocks out of the gate, with DHG and CSL shares down 5%.

Super Retail Group (ASX:SUL) was the best performer, advancing 5% at the open.

Super Retail reported another year of record sales, posting a FY22 net profit of $241.2 million.

It’s a jam-packed day on the ASX as reporting season hits high gear.

Companies releasing their results include:

• Amcor
• Santos
• Nearmap
• Redbubble
• ANZ
• Bapcor
• Brambles
• Corporate Travel
• Magellan
• Super Retail
• Whispr
• Vicinity Centres
• Domain
• CSL

The released results from these companies will go a long way in indicating how businesses are coping with inflationary pressures and economic downturn concerns.