Experts think these 2 ASX shares have more than 100% upside after the plunge

A woman sits at her computer in deep contemplation with her hand to her chin and seriously considering information she is receiving from the screen of her laptop regarding the Xero share price

A woman sits at her computer in deep contemplation with her hand to her chin and seriously considering information she is receiving from the screen of her laptop regarding the Xero share price

The large falls being seen across the ASX share market could be opening up some big opportunities for some of these businesses to rebound, according to experts.

It’s important to note that just because something has fallen doesn’t mean it’s definitely going to go back up to the price it was at before the fall. There’s also no telling when investors will regain optimistic sentiment about the ASX share market.

However, experts come up with price targets – that’s where they think the share price will be in 12 months.

With that in mind, here are two ASX shares that are rated as buys with a possible upside of more than 100% if brokers’ price targets end up being accurate.

Step One Clothing Ltd (ASX: STP)

Step One describes itself as a direct-to-consumer online retailer of innerwear. The ASX share says it offers a range of “quality, organically grown and certified, sustainable and ethically manufactured innerwear that suits a broad range of body types”. It operates in Australia, the US, and the UK.

While there is the ongoing market focus on inflation and interest rates, the company recently gave a trading update which included a reduction of guidance because of “difficult trading conditions”. The Step One share price plunged after this announcement.

Revenue is now expected to grow by between 15% to 20%, down from guidance of 21% to 25% growth. Projected pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be between $7 million to $8 million, down from $15 million.

The company pointed to lower growth than expected in the USA and UK, though Australia continued to produce a “strong contribution margin”, underpinning revenue growth. Profitability is being hurt by higher marketing costs, as well as higher factory and logistics costs.

The broker Morgans thinks that Step One is a buy, with a price target of $0.60. This suggests an upside of around 160%.

However, the broker acknowledged the difficulties the ASX share revealed in its trading update. But, Morgans is optimistic Step One will keep generating cash flow and making a profit during this period.

The company says it will keep focusing on growth by expanding its product lines and trying to grow its USA and UK businesses.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is a leading online retailer of homewares and furniture.

It’s currently rated as a buy by the broker Credit Suisse, with a price target of $9.59. That implies a possible rise of around 170%.

The broker noted the trading update that the business released in early May 2022. Temple & Webster said revenue for the period 1 January 2022 to 30 April 2022 was up 23% year on year and up 116% over two years.

The business is investing in various areas of its operations to improve the company. These include data, personalisation, augmented reality, artificial intelligence, and logistics, as well as its private label offering. Management said the business is also open to making acquisitions.

At the current time, Temple & Webster is investing in a new website called ‘The Build’ which sells home improvement products.

Credit Suisse also thinks the company can grow its market share over time with its investments.

The post Experts think these 2 ASX shares have more than 100% upside after the plunge appeared first on The Motley Fool Australia.

Wondering where you should 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 over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of January 12th 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Motley Fool contributor Tristan Harrison 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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/LY1pDZT

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s