Day: 15 May 2023

The leading investors from Wilson Asset Management (WAM) have shared thoughts on two S&P/ASX 200 Index (ASX: XJO) shares.

WAM operates several listed investment companies (LICs). Some, like WAM Leaders Ltd (ASX: WLE), focus on larger companies.

Meanwhile, WAM Capital Limited (ASX: WAM) targets “the most compelling undervalued growth opportunities in the Australian market”.

But does WAM have a claim of stock-picking pedigree? The WAM Capital portfolio has delivered an investment return of 15% per annum since its inception in August 1999. That’s before fees, expenses, and taxes. This gross return outperformed the All Ordinaries Accumulation Index (ASX: XAOA) return of 9% per annum over the same timeframe.

With that in mind, here are the two ASX 200 shares WAM Capital has outlined in its recent monthly update.

Nextdc Ltd (ASX: NXT)

WAM described Nextdc as an independent data centre operator which builds and delivers the infrastructure platform for the digital economy.

The Nextdc share price went up around 10% in April, as we can see on the below chart.

WAM pinpointed the rise for the ASX 200 share on its announcement that its contracted utilisation had increased by 43% since 31 December 2022.

The fund manager also pointed out that the company announced that it had successfully secured further contract wins and its new S3 data centre is now at 46% of total planned capacity.

In explaining why it was a top 20 position in the WAM Capital portfolio and the positive view on the business, WAM said:

We are pleased to see Nextdc’s customer growth and we look forward to the progressive realisation of revenue from these new customer contract wins from late FY2024 to FY2029.

HMC Capital Ltd (ASX: HMC)

WAM described HMC Capital as a diversified alternative asset manager which “invests in high conviction and scalable real asset strategies.”

The fund manager noted that in April HMC Capital successfully completed its oversubscribed $30 million share purchase plan (SPP) as well as its fully underwritten $125 million institutional placement.

The HMC Capital share price went up by around 9% in April, as can be seen in the chart below.

The ASX 200 share is planning to use the raised money to fund its commitment to the capital raising announced by one of its funds, Healthco Healthcare and Wellness REIT (ASX: REIT), which is a real estate investment trust (REIT). Some of the money will also be used to “provide an equity backstop for the new unlisted fund.”

The investment team explained why they were impressed by the HMC Capital business:

These accomplishments showcase HMC Capital’s ability to secure capital amidst challenging market conditions and support the company’s goal to achieve $10 billion in assets under management by December 2023, and subsequently $20 billion thereafter.

The post 2 ASX 200 shares this fund manager is backing with major growth plans appeared first on The Motley Fool Australia.

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More reading

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• NextDC share price halted amid $618 million cap raise
• Goldman Sachs just added this ASX All Ords tech share to its conviction list
• Wesfarmers share price on watch amid $169m Silk Laser takeover offer
• Why this fund manager thinks these 2 outperforming ASX shares can keep beating the market

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 no position in any of the stocks mentioned. 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 Scott Phillips.

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The QBE Insurance Group Ltd (ASX: QBE) share price was out of form on Friday.

The insurance giant’s shares dropped almost 4% to end the week at $14.61.

Investors were selling down the QBE share price after the company’s first-quarter trading update revealed a couple of items that overshadowed an otherwise strong start to the year.

In light of this, investors may be wondering if a buying opportunity has opened up. Let’s find out.

Should you buy the QBE share price dip?

The team at Morgans remains positive on QBE following its update.

And while the broker described the quarter as a “blip”, its analysts “still see the fundamental story of QBE’s earnings improving strongly over the next few years as intact.”

According to the note, the broker has retained its add rating with a trimmed price target of $16.50.

Based on the current QBE share price, this suggests potential upside of 13% for investors over the next 12 months.

And of course, QBE is traditionally a big dividend payer. Pleasingly, Morgans doesn’t expect this to be any different this year. It is forecasting a 5.8% dividend yield for investors, boosting the total potential return to almost 19%.

What did the broker say?

Morgans remains positive and sees plenty of value in the QBE share price despite the mixed quarter. It explained:

QBE has given a 1Q23 performance update. Overall FY23 GWP growth guidance has been increased to +10% on the pcp (up from mid-to-high single digit growth previously), but disappointingly combined operating ratio guidance has also been lifted to 94.5% (previously 93.5%) due to higher CAT claims and a prior year reserve top up. We downgrade QBE FY23F/FY24F EPS by 3%-5% reflecting higher current year claims forecasts and more conservative outer year earnings estimates. Our PT is set at A$16.50.

Whilst higher claims than expected impacted QBE’s 1Q23 performance, we still see the fundamental story of QBE’s earnings improving strongly over the next few years as intact. We maintain our ADD recommendation, with the stock trading on an undemanding ~10x FY23F PE multiple.

The post Broker urges investors to buy the QBE share price dip appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
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• I’m following Warren Buffett and preparing for a stock market crash
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• QBE share price on watch following strong Q1 update

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 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 Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) lithium shares have been the talk of the investing town for years now. The battery-making material is generally touted as critical for the future of energy security.

Interestingly, however, companies producing (or aiming to produce) the white metal appear far more popular with everyday investors than with the wealthiest among us.

That’s according to new data from investing platform Selfwealth Ltd (ASX: SWF).

Just over 1,200 portfolios housed on the platform are worth more than $1 million. That’s less than 1%.

And their top investments differ to those of the average portfolio in one particularly noticeable way: They own far fewer ASX 200 lithium shares.

Millionaire investors avoid ASX 200 lithium shares

Take a stab at the most popular ASX 200 share among all Selfwealth investors, by volume. I’ll give you a second to lock in a guess.

If you said Lake Resources NL (ASX: LKE), pat yourself on the back. It comes in as the top stock and the fourth most popular ASX investment overall, behind three exchange-traded funds (ETFs).

In second place is Core Lithium Ltd (ASX: CXO). Meanwhile, Pilbara Minerals Ltd (ASX: PLS), Sayona Mining Ltd (ASX: SYA), and Liontown Resources Ltd (ASX: LTR) are all found within the platform’s 20 most popular investments.

But what about the wealthiest 1% of investors?

Well, only one ASX 200 lithium share appears in the 20 most popular investments found within portfolios worth more than $1 million.

That is S&P/ASX 20 Index (ASX: XTL) giant Pilbara Minerals. The $14 billion ASX 200 lithium share holds the seventeenth spot among millionaires’ largest holdings.

So, what are Aussie millionaires investing in instead? Many appear to turn to ASX 200 blue chips, as my Fool colleague Tony reports.

The most popular ASX investment among the largest 1% of portfolios is Fortescue Metals Group Limited (ASX: FMG). Its iron ore peer BHP Group Ltd (ASX: BHP) comes in third place.

Big four banks Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), and Commonwealth Bank of Australia (ASX: CBA) also make the top 10.

The post Power portfolios: Millionaire investors shun ASX 200 lithium shares appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• What’s the 5-year forecast for commodity prices and ASX 200 mining shares?
• Are Pilbara Minerals shares a ‘lower-risk’ ASX lithium buy right now?

Motley Fool contributor Brooke Cooper 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 recommended Westpac Banking Corporation. 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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The BrainChip Holdings Ltd (ASX: BRN) share price has more than halved in the last year.

The artificial intelligence (AI) company’s share price has dropped 59% from $1.115 at market close on 13 May to its current share price of 45.5 cents. For perspective, the S&P/ASX All Technology Index (ASX: XTX) has risen nearly 12% in the same time frame.

Let’s take a look at what’s been weighing on the BrainChip share price.

What’s been going on?

A $5,000 investment in BrainChip shares 12 months ago would now only be worth $2,050 based on the company’s last closing price.

BrainChip shares appear to have tumbled amid multiple financial reports showing cash receipts far lower than the company’s market capitalisation.

In April, BrainChip shares tanked amid a quarterly update showing cash inflows of US$40,000. This was when Brainchip’s market cap was $804 million.

BrainChip also attracted considerable attention from short sellers in April and March, as my Foolish colleague James reported at the time.

However, early in March, BrainChip delivered some positive news to the market. The company launched its Akida platform. This technology drives edge devices for the Artificial Intelligence of Things (AIoT) solutions and services market.

Commenting on the new technology at the time, CEO Sean Hehir said:

This new generation of Akida allows designers and developers to do things that were not possible before on an Edge device. By inferring and learning from raw sensor data, we take a substantial step toward a cloudless Edge AI experience.

With this launch, we have significantly extended our competitive advantage in neuromorphic AI.

It was welcome news after BrainChip shares also fell in February. This was when the company revealed it delivered only US$250K in revenue in the second half of 2022. The company’s loss after tax was US$22.1 million.

Earlier, in January, the company’s share price dropped amid another quarterly update. BrainChip delivered cash receipts of US$1.164 million in the three months to the end of December. This compared to a market cap of $1.2 billion at the time.

In early December, BrainChip’s CEO sold 917,025 ordinary shares worth between $664,843 and $701,524. The company’s statement at that time said this was “for the purpose of meeting taxation obligation as a result of previous vesting of restricted stock units”.

In November, BrainChip director Antonio Viana sold 125,000 ordinary shares at 63 cents each for the same stated reason. Directors selling off shares can sometimes be a red flag for investors who like to see insider confidence in the company.

Meanwhile, in October, BrainChip shares also descended amid a quarterly update. The company reported cash receipts of only $118,000 in the September quarter, or $39,000 per month.

BrainChip share price snapshot

The BrainChip share price has slid 39% in 2023 so far.

In the past month, BrainChip shares have lost 3%. However, in the last week, the company’s share price has gained 15%.

The post $5,000 invested in BrainChip shares a year ago is now worth around $2000. What went wrong? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Just how much further can BrainChip shares fall?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Monica O’Shea 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 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 Scott Phillips.

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It has been a disappointing period for Paladin Energy Ltd (ASX: PDN) shares.

Since the start of February, the uranium developer’s shares have lost 20% of their value to end Friday’s session at 66.5 cents.

This is despite a recent rebound, which has seen its share price rise 19% since falling as low as 56 cents in late March.

Are Paladin Energy shares now good value?

With some analysts suggesting that a bull market is starting for uranium, investors may be wondering whether its shares are good value.

Well, the good news is that one leading broker sees huge amounts of value in its shares at the current level. Though, it is worth noting that its recommendation comes with a speculative warning.

According to a recent note out Bell Potter, its analysts have a speculative buy rating and 99 cents price target.

Based on where Paladin Energy shares are currently trading, this implies potential upside of approximately 49% for investors over the next 12 months.

The broker commented:

PDN is in a good position leading into the restart of operations at Langer Heinrich Mine (LHM), with production largely covered for CY24 and CY25 we believe. Over 1HFY23 PDN executed three additional offtake contracts, with another awaiting finalisation. This, including the previously announced Duke contract and the offtake with JV partner Chinese National Nuclear Corp (CNNC), brings the total number of offtake parties to six.

In 2QFY23 PDN announced the improvement of payment terms and increase in offtake volumes with CNNC, which provides greater spot price leverage over CY24 & CY25 and speedier cash receival. Details pertaining to volumes of the four additional contracts will be released once the final contract is executed.

The post Down 20% since February, should I buy the dip on Paladin Energy shares? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• 3 ASX 200 shares making big moves following quarterly updates

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 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 Scott Phillips.

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Aristocrat Leisure Ltd (ASX: ALL) could be a must-buy ASX 200 share according to analysts at Goldman Sachs.

And with the gaming technology company’s half-year results on the horizon, the broker is urging investors to buy its shares before it’s too late.

What is Goldman saying about this ASX 200 share?

According to a note out of the investment bank this morning, its analysts have reiterated their buy rating and $45.70 price target. Importantly, the broker has also kept Aristocrat on its coveted conviction list.

These are the shares that Goldman feels have a combination of big potential returns and a high likelihood of realising this potential. It said:

Based on the current Aristocrat share price of $38.69, this implies potential upside of 18.1% for investors over the next 12 months. And if we throw in the expected 2% dividend yield, the total potential 12-month return stretches beyond 20%.

Why is the broker so bullish?

Goldman has been looking at how this ASX 200 share’s rivals have been performing and believes it points to a strong first-half in the key Americas region. It said:

Key listed gaming peers in the US have reported 1Q23 results across the land-based space over the past couple of weeks. Common themes across all results were continued strength in topline growth and shipments, i.e. flagging strong industry growth for the quarter, except where company specific factors were in play. For ALL, we expect the Americas division to report c. 18.2% growth yoy for 1H23.

And while the broker acknowledges that there are some short-term concerns over the performance of its Pixel United (digital) business, it isn’t enough to put Goldman off. Particularly given its diverse business and attractive valuation. It concludes:

Feedback from recent investor conversations shows that there remains strong interest in the name, especially on the iGaming opportunity, although there remains divided opinions on how quickly this becomes a meaningful part of the business. Outlook for Pixel United continues to be the key area of concern for investors.

We view ALL as offering the most diversified growth opportunities in the ANZ Gaming space with a strong balance sheet and at attractive valuation multiples. We are Buy rated (On CL) on ALL with a 12m Target Price of A$45.70 and offering a total return of +20.6%.

The post Buy this ASX 200 share for a 20% return before it’s too late: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• Morgans names the best ASX 200 stocks to buy in May
• Why analysts are bullish on these ASX 200 growth shares
• Brokers say these ASX growth shares could generate big returns for investors
• Supercharge your portfolio with these 3 ASX growth shares: brokers
• Top brokers name 3 ASX shares to buy next week

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 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 Scott Phillips.

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CSL Limited (ASX: CSL) shares are backed by some of the biggest ASX companies in Australia.   

The ASX healthcare share is a biotech giant with a market capitalisation of around $145 billion according to the ASX.

It has done incredibly well for long-term shareholders. Over the past decade, the CSL share price has risen by around 400%. Plus its (relatively small) dividends boost the 10-year return even more.

Despite CSL now being a large company, some of the ASX’s biggest businesses also hold a sizeable position in the healthcare giant, which may suggest they’re confident about its future.

Which ASX companies own CSL shares?

There are four names within the twenty largest shareholders that I’m going to tell you about: Netwealth Group Ltd (ASX: NWL), Australian Foundation Investment Co Ltd (ASX: AFI) (AFIC), Argo Investments Limited (ASX: ARG), and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Argo and AFIC are two of the ASX’s largest and oldest listed investment companies (LICs). They focus on ASX blue chip shares that can provide a mixture of dividends and capital growth.

At the end of April, CSL shares were the third largest position in the AFIC portfolio, with an 8.1% weighting. CSL was also the third largest position in the Argo portfolio, with a 5.2% holding at the end of April.

Soul Pattinson is the largest investment business on the ASX, with part of its investment strategy focused on large ASX shares. Of its large-cap portfolio, worth $2.9 billion at 31 January 2023, CSL was the third-largest holding with a 6.6% weighting.

Netwealth is slightly different to the other three ASX companies I’ve mentioned. It’s a fintech business that offers ‘wrap’ services for self-managed super funds (SMSFs) and high net worth clients where they can manage their investments (including buying and selling).

It seems Netwealth holds these CSL shares on behalf of other investors, rather than a Netwealth fund manager deciding to become one of the largest CSL shareholders.

Could the biotech giant keep delivering healthy returns?

As I mentioned above, the CSL share price has done very nicely over the last decade. The past five years have been solid, with a rise of around 70% as we can see on the chart below. That’s despite the impacts of the COVID-19 pandemic.

The dividend has also grown from around $1.05 per share in 2013 to $3.18 per share in 2022.

Estimates on Commsec suggest the ASX healthcare share is expected to grow its profit and dividend over the next few years. Certainly, this could be helpful support for the CSL share price.

Using FY23 projections, it’s valued at 38 times FY23’s estimated earnings and could pay a dividend per share of $3.42.

Over the next two years to FY25, it could grow profit by 46%. This would mean the CSL share price is only valued at 26 times FY25’s estimated earnings.

With the business pumping billions of dollars into research and development, it could continue to grow earnings as it launches new health products for patients and healthcare institutions.

The post 4 ASX companies that own CSL shares (and lots of them!) appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Turning ASX shares into a $40,000 annual passive income generator
• It’s still rare to find a term deposit paying over 5%. Why not buy ASX dividend shares instead?
• The top 10 ASX shares held by millionaires
• Why did the Washington H Soul Pattinson share price just smash a new 52-week high?

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Netwealth Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Netwealth Group and Washington H. Soul Pattinson and Company Limited. 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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When a quality company with excellent long-term prospects is having some short-term issues, it’s a time to buy.

Shaw and Partners portfolio manager James Gerrish, in his Market Matters newsletter, identified exactly such an ASX stock this week.

“We’ve been flagging diversified metals and mining company South32 Ltd (ASX: S32) for a number of weeks, following their weaker-than-expected quarterly production update in April.”

Short-term wobbles, long-term strength

Indeed the South32 share price tumbled 9% in just a few hours on 24 April after it downgraded guidance.

Production fell across the board in the March quarter after unfavourable weather impacted some of its operations.

The stock for the metals miner has fallen almost 8% over the past 12 months.

Gerrish’s team isn’t letting that impact its longer-term view of the mining sector.

“Recession fears are building, which is putting pressure on the miners,” he said.

“We like the stock, and the pieces of the puzzle are starting to come together for us to increase our exposure to resources, a plan we’ve held for months but have remained patient to date.”

Arguably the best feature about South32 shares is the 8% dividend yield, which is fully franked.

Gerrish’s Shaw and Partners colleague Jed Richards agreed with his bullishness.

“The recent share price retreat represents a buying opportunity, as South32 offers an appealing mix of raw material and base metal exposures,” Richards told The Bull.

“China re-opening its economy should boost commodity prices.”

This is when you pounce

Gerrish predicted that the dividend yield would remain solid in the coming period.

“South32 currently trades on an estimated PE of 9.5x for 2023, plus it’s also forecast to yield more than 5% over the next 12 months,” he said.

“In our opinion, S32 gives an excellent diversified resources exposure without the huge exposure to iron ore which comes with both BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO).”

The team at Market Matters would buy up South32 shares as soon as it hits a particular sweet spot.

“We are looking to accumulate South32 into any weakness under $4.”

The South32 share price closed Friday at $4.02.

The post Stay alert! Expert urges buying this ASX dividend stock as soon as it dips below $4 appeared first on The Motley Fool Australia.

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More reading

• Analysts name 2 strong ASX 200 dividend shares to buy
• Invested $4,000 in South32 shares 5 years ago? Here’s how much passive income you’ve earned
• South32 share price slumps amid ‘important’ US milestone
• ‘Buying opportunity’: 2 ASX 200 mining shares ripe to snap up now
• Here’s why brokers say these ASX dividend stocks with big yields are buys

Motley Fool contributor Tony Yoo 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 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 Scott Phillips.

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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) continues its long run as the most shorted ASX share after its short interest rose slightly to 11.8%. Short sellers aren’t giving up on this one despite a recent trading update coming in strong. Revenue margin headwinds appear to be the chief concern of short sellers.
• Zip Co Ltd (ASX: ZIP) has short interest of 10.25%, which is down week on week. Profitability and regulatory concerns seem to be behind this.
• Core Lithium Ltd (ASX: CXO) has short interest of 8.8%, which is down week on week. Short sellers will be frustrated to have seen this lithium miner’s shares rocket higher last week after further M&A activity in the industry.
• Jervois Global Ltd (ASX: JRV) has 8.6% of its shares held short, which is down week on week. The suspension of the final construction of the Idaho Cobalt Operations has hit this company’s shares hard.
• Sayona Mining Ltd (ASX: SYA) has seen its short interest ease to 8.5%. Sayona Mining’s shares also rose strongly last week amid further lithium M&A activity.
• Pointsbet Holdings Ltd (ASX: PBH) has 8.45% of its shares held short, which is up slightly week on week. Short sellers appear concerned by this sports betting company’s huge cash burn in a highly competitive industry.
• Lake Resources N.L. (ASX: LKE) has 8% of its shares in the hands of short sellers, which is down since last week. An almost 20% gain last week by this lithium developer’s shares will have been hard for short sellers to take.
• AMA Group Ltd (ASX: AMA) has 7.7% of its shares held short, which is down week on week. This smash repair company’s balance sheet is in a very precarious state.
• Temple & Webster Group Ltd (ASX: TPW) has seen its short interest ease to 7.6%. Traders appear to believe the housing market downturn and a return to offline shopping could mean this online retailer underperforms.
• Megaport Ltd (ASX: MP1) has seen its short interest fall again to 7.4%. Short sellers have been closing positions since this network as a service company released a very positive trading update and guidance.

The post Here are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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• Here are the 3 most heavily traded ASX 200 shares on Thursday

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 positions in and has recommended Megaport, PointsBet, Temple & Webster Group, and Zip Co. The Motley Fool Australia has recommended Flight Centre Travel Group, Megaport, PointsBet, and Temple & Webster 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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The Technology One Ltd (ASX: TNE) share price could be great value ahead of its results release later this month.

That’s the view of analysts at Bell Potter, which have just upgraded the ASX 200 tech share to a buy rating from hold.

According to the note, the broker now has a buy rating and improved price target of $17.00 on the enterprise technology provider’s shares.

So, with the Technology One share price currently fetching $14.88, this implies potential upside of 14% over the next 12 months.

Why is the broker bullish on this ASX 200 tech share?

The note reveals that Bell Potter is expecting Technology One to release a strong result later this month when it provides its half-year update.

Bell Potter expects the following to be reported:

Total revenue up 14% to $196.6m; PBT up 17% to $49.9m; PBT margin up from 24.7% in 1HFY22 to 25.4% in 1HFY23; and interim dividend up 10% to 4.62c (60% franked).

The broker also highlights that the company’s annualised recurring revenue (ARR) will be a key focus. Pleasingly, it is expecting very strong growth in this key metric. It adds:

Key focus for us, however, will be on total ARR which we forecast to grow by 21% to $350m at the end of H1 and such a result will make the $500m+ target by the end of FY26 look very achievable if not conservative.

Why should you invest?

Bell Potter believes this positive medium term outlook makes this an ASX 200 tech share to buy now. Particularly given its belief that management will be forced to upgrade its guidance in due course. It explains:

We also continue to forecast total ARR of $385m, $452m and $535m at the end of FY23, FY24 and FY25. That is, we already forecast Technology One will achieve its $500m+ total ARR target in FY25 and hence why we expect the company to bring forward this target by a year at some stage this calendar year.

The post Why Bell Potter just upgraded this ASX 200 tech share appeared first on The Motley Fool Australia.

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More reading

• TechnologyOne share price rises on cyber incident update
• ASX 200 stock Technology One halted following cyber attack

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 positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. 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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