Buy now pay later stocks surge (TWE, PPS)
WHAT MATTERED TODAY
The Aussie market bounce back today after yesterday’s weakness with the market up +35pts led by some fairly spectacular gains in the buy now pay later space, two companies we’ve spoken about recently did well with Z1P rallying by more than 10% while Openpay (OPY) put on more than 20%, clearly a hot sector on the market today as Afterpay (APT) crushed through its raise price of $66 to close up 11% at $73.50. I had lunch today with an older broker who is retiring, and the conversation was around tech stocks, there remains so much scepticism in the space that it seems the only direction is up – in my view. Stay open minded here, the growth in the sector is clearly phenomenal.
At a sector level today, IT stocks were strong followed closely by energy while the defensive names clearly lagged, Consumer Staples and REITs the obvious drags.
Overall, the ASX 200 added +35pts / +0.59% to close at 5955. Dow Futures are trading down -45pts / -0.18%.
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
Treasury Wines (TWE) -2.93%: The wine company downgraded guidance this morning saying EBIT would be $530-$540m versus the $574m expected by the market which is a 6% downgrade to expectations, however there were a few offsets that meant the share price held up better. They have a new CEO so the downgrade was not unexpected plus they spoke more favourably about trends in China and the US, at least in terms of volume rather than price. We wrote about this in the weekend report and while todays update implied weakness near term, the actual trends seem to be turning for the better. Down but not out by any stretch.
Treasury Wines (TWE) Chart
Platforms: Praemium (PPS) launched a bid for rival platform Powerwrap (PWL) today, a deal that has been rumoured for some time. The offer of 7cps and 1 PPS per 2 PWL shares, representing more than a 50% premium to the last close price. Praemium already holds around 15% of PWL shares while the price represents just 1.4x EV/Sales valuation. The combined group will have FUA of over $27b with scale key for the independent platforms. Shares in both names were higher today, PPS up 22.97%, and PWL 65.71%. We use Praemium and while we’ve had our challenges in the past, its improving and the Powerwrap acquisition is a good one.
Praemium (PPS) Chart – I think this is a buy!
Netwealth (NWL) was also better today guiding EBTDA for FY20 to $58-62m, around in line with consensus at $61m. Importantly it saw inflows return after the tumultuous markets in March with FUA up 35% for the year to $31.5b. NWL jumped 9.16%.
BROKER MOVES:
· WiseTech Cut to Lighten at Ord Minnett; PT A$19.60
· Saracen Mineral Cut to Underperform at Macquarie; PT A$5.40
· Telstra Raised to Buy at HSBC; PT A$4.40
· Pacific Smiles Raised to Buy at Bell Potter; PT A$1.75
· Afterpay Raised to Overweight at Morgan Stanley; PT A$101
· Select Harvests Cut to Hold at Bell Potter; PT A$6.10
OUR CALLS
No changes today
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
Disclosure
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