Why some of your favourite ASX growth shares are free-falling this week

Classic ASX growth shares such as Redbubble Ltd (ASX: RBL) and Lynas Rare Earths Ltd (ASX: LYC) have taken a tumble this week. Here’s why.
The post Why some of your favourite ASX growth shares are free-falling this week appeared first on The Motley Fool Australia. –

A businessman in a suit and wearing boxing gloves, slump in the corner of a ring, indicating a corporate fight between ASX companies

Many ASX shares have reported quarterly updates this week. Broadly speaking, an initial read of these results might tick all the boxes with solid growth across key performance metrics.

However, the market response has appeared very critical of slight headwinds contained in the updates. As a result, some of these beloved ASX growth shares have experienced sharp selloffs this week. 

Let’s take a look at 3 of them.

ASX shares sent into free-fall this week

Redbubble Ltd (ASX: RBL) 

The Redbubble share price took a 23% tumble to $4.24 on Thursday after a seemingly positive third-quarter update

The update represents a classic case of a richly valued growth story delivering a reasonable result with a slight tweak of plans. The company said that its earnings before interest, tax, depreciation, and amortisation (EBITDA) margins were going to take a small hit from 9.5% to mid-single digits. It was also going to ramp up marketing and headcount to drive customer acquisition and awareness. 

The increase in costs and lower margins will likely mean a reduction in earnings forecasts, and we all know what happens to growth stories when earnings recede. 

In an attempt to restore near-term confidence, the update highlighted an aspiration goal to more than double revenues and improve EBITDA margins to 10-15% by CY24. Despite a strong aspiration goal, the market was near-sighted and concerned with the potential damage short term earnings might take. 

Lynas Rare Earths Ltd (ASX: LYC) 

The Lynas share price has taken a similar downturn, diving 16% in the past three trading sessions. Again, the company delivered a seemingly positive March quarter update with stronger operational and financial metrics across the board. 

However, the update also observed that Chinese rare earth producers were planning to increase production in response to robust demand. And among them was Northern Rare Earth, a mining giant that accounts for some 60% of China’s total rare earth production and plans to double production within the next three years. 

China accounts for more than half the world’s rare earth output, so for a company of that size to double production within three years, it could have a significant negative impact on rare earth prices. 

From what looked like blue skies ahead, the market now has to digest a potential influx of Chinese material in the near term. 

Splitit Ltd (ASX: SPT) 

The Splitit share price has dropped 10% this week, down to a 16-month low of 79.5 cents. The company delivered a positive first-quarter update that revealed classic triple-digit buy now pay, later growth (on the prior corresponding period) across key metrics such as revenue and merchant sales volume. However, from a quarter-on-quarter perspective, growth was actually slowing down. 

While seasonality could be a contributing factor, BNPL majors Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) both reported continued momentum across key metrics. 

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Kerry Sun 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 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 Bruce Jackson.

The post Why some of your favourite ASX growth shares are free-falling this week appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!