Morgans names the best ASX 200 blue chip shares to buy in May

An older woman clasps her hands with joy, smiling at the news on her computer as she sits at her kitchen bench..

An older woman clasps her hands with joy, smiling at the news on her computer as she sits at her kitchen bench..

If you are wanting to invest in some blue chip ASX 200 shares, then Morgans has your back.

It has just released its best ideas for May and has named several blue chip stars on its list.

Two that could be top options this month are listed below. Here’s why its analysts rate them highly:

Qantas Airways Limited (ASX: QAN)

The flying kangaroo could be a blue chip ASX 200 share to buy according to Morgans. As well as making its best ideas list, the broker has named the company as its top pick in the travel sector right now.

Morgans rates Qantas highly due to its cheap valuation, pent-up demand, positive outlook, and strong balance sheet. It explained:

QAN is now our preferred pick of our travel stocks under coverage given it has the most near-term earnings momentum. Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply. QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings). The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further EBITDA growth over FY24/25. QAN’s balance sheet strength positions it extremely well for its upcoming EBIT- accretive fleet reinvestment and further capital management initiatives (recently announced a A$500m on-market share buyback at its 1H23 result). There is also likely upside to our forecasts and consensus if QAN achieves its FY24 strategic targets.

The broker has an add rating and $8.35 price target on Qantas’ shares.

Telstra Group Ltd (ASX: TLS)

This telco giant also gets the thumbs up by Morgans. Its analysts believe Telstra is an ASX 200 blue chip share to buy thanks to the success of its turnaround, its strong earnings momentum, and its valuation. In respect to the latter, the broker believes that value could soon be unlocked through asset divestments. It commented:

After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders vote[d] on Telstra’s legal restructure, which opens the door for value to be released. TLS currently trades on ~7x EV/EBITDA. However some of TLS’s high quality long life assets like InfraCo are worth substantially more, in our view. We don’t think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.

Morgans has an add rating and $4.70 price target on Telstra’s shares. It is also expecting a fully franked dividend yield of approximately 4% in FY 2023 and FY 2024.

The post Morgans names the best ASX 200 blue chip shares to buy in May appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 positions in and has recommended Telstra Group. 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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