Why Westpac shares are a smart buy for ASX bargain hunters

A female executive smiles as she carries out business on her mobile phone.

A female executive smiles as she carries out business on her mobile phone.

Due to recent market volatility, there are potentially quite a few bargains on the Australian share market right now.

One of those bargains could be Westpac Banking Corp (ASX: WBC) shares based on what brokers are saying.

Are Westpac shares a bargain buy?

At present, there are a large number of brokers that are recommending Australia’s oldest bank as a buy. This includes the likes of Citi, Goldman Sachs, Morgan Stanley, Morgans, and UBS.

And while these brokers exhibit varying degrees of bullishness, each of their price targets imply potential upside of greater than 15% from current levels.

And that’s not including the dividends that Westpac’s shares will provide over the next 12 months. According to CommSec, the consensus estimate is for a dividend of $1.38 per share in FY 2023.

Based on the current Westpac share price of $22.08, this will mean a 6.25% fully franked yield for investors.

Even greater upside potential

One of the more bullish brokers is Goldman Sachs. It currently has a conviction buy rating and $27.74 price target on Westpac’s shares. This implies potential upside of almost 26% for investors from current levels.

Its analysts recently highlighted that the bank’s shares are “trading at a 22% 12-month forward PER discount to peers.” Whereas historically they have traded at just a 2% discount. This is despite the bank having arguably one of the strongest outlooks in the sector at present. Goldman adds:

We are Buy-rated (on CL) and continue to see WBC as our preferred exposure to the A&NZ Financials reflecting: i) its strong leverage to rising rates, ii) despite WBC revising its FY24E cost target to A$8.6 bn (from A$8.0 bn), the bank’s performance on cost management remains strong in this inflationary environment with a 9% step down in costs expected over the next two years, iii) the business is still investing effectively in its franchise, and iv) we note the stock is trading at a notable discount to peers, versus the historical average discount of 2%.

All in all, Goldman appears to believe this could make Westpac shares a bargain buy right now.

The post Why Westpac shares are a smart buy for ASX bargain hunters appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor James Mickleboro has positions in Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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