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SoftBank investment sends the THG share price soaring

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UK e-commerce group THG (LSE:THG) received a welcome boost yesterday morning as investors learned Japanese investment heavyweight SoftBank has agreed to take a £710m ($1bn) stake. SoftBank will also pay up to $1.6bn to invest in THG’s Ingenuity division, via a tech subsidiary that does not yet exist. SoftBank has a history of investing in tech and e-commerce companies, so it seems to recognise a good thing when it sees it.

What does THG do?

THG manufactures and sells beauty and healthcare products direct to consumers. It also does this on behalf of other brands, earning a marketing fee in the process. The THG share price soared over 14% yesterday, a day when the FTSE 100 slumped over 2.6%.

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THG’s Ingenuity platform is fast becoming a way for brands to market their products directly to consumers. Procter & Gamble, Johnson & Johnson, Nintendo and Nestle are all partners of THG’s Ingenuity platform. This set-up allows THG to dispatch over 68 million items to customers globally.

Part of THG’s growth strategy is the acquisition of premium brands. These include Myprotein, Lookfantastic, Zavvi, Skinstore and many more. And THG has just announced yet another acquisition, Bentley Laboratories, a New Jersey-based beauty developer and manufacturer. THG will pay $255m for Bentley. This is expected to increase FY22 revenues by approximately $77m and adjusted EBITDA by around $15m.

Matthew Moulding, Founder, Executive Chairman and CEO of THG said: “The acquisition of Bentley materially increases our capability in beauty manufacturing and product development, and strengthens our position as the leading digital beauty business globally.”

After Tuesday’s share price rise, the shares are down over 4% today. The THG share price has actually fluctuated considerably this past year and is down over 18% since its 52-week high.

Financial markets around the world are sliding as tech stocks lose favour with investors. Inflation concerns are making investors nervous, particularly as commodity prices continue to rise. So I think tech stocks such as THG could expect to face share price volatility for some time to come.

I already own shares in THG, but now that SoftBank is on board I’d consider adding more in the future.

Morrisons reports solid Q1 sales

FTSE 250 supermarket Morrisons (LSE:MRW) also enjoyed a price rise yesterday as it presented better than expected results. The company reported like-for-like sales excluding fuel rising 2.7% in Q1. But that was down from a 9% rise in Q4, most likely hindered by the third lockdown.

As the pandemic hit, Morrisons jumped on the home delivery bandwagon, catching up with rivals Tesco and Asda. I think the company is making a concerted effort to turn its image and profitability around, but it’s got a challenging road ahead.

Morrisons faces rising competition and inflation could set its share price on a downward trend. But it does have a lucrative partnership with Amazon. Morrisons provides much of the Amazon branded food in its till-free grocery stores. Plus, Morrisons sells directly through Amazon’s grocery service online. Rumours of Morrisons being bought out by Amazon have been circulating for years, but so far there’s no reason to believe it will happen.

The Morrisons price-to-earnings ratio is 46, earnings per share are 4p, and its dividend yield is approaching 4%. I like that it’s partnered with Amazon and this, combined with the dividend, tempt me to invest in Morrisons shares.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Kirsteen owns shares of Amazon and THG Holdings plc. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Johnson & Johnson, Morrisons, and Tesco and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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