Earlier today I highlighted three shares on the S&P/ASX 200 Index (ASX: XJO) that have recently reached new highs.
While those ASX 200 shares have recovered strongly from the market selloff earlier this year, not all shares on the index have done so.
Two ASX 200 shares that are still trading notably lower than their 52-week highs are listed below. Are they in the buy zone?
Aristocrat Leisure Limited (ASX: ALL)
The Aristocrat Leisure share price is down over 30% from its 52-week high of $38.23. The gaming technology company’s shares have come under significant pressure this year after the pandemic forced the closure of casinos. This impacted land-based unit sales and revenues generated from its daily fee model. The good news is that the company’s Digital segment have helped cushion the blow. Thanks to lockdowns, closures, and the growing popularity of mobile gaming, Aristocrat’s digital operations have been thriving and generating significant recurring revenues.
For example, during the first half of FY 2020, group revenue increased 7% to $2.25 billion. This reflects a 6% decrease in Land-based revenues and 19% growth in Digital revenue. Given the favourable tailwinds, I’m confident there will be more of the same in the second half and beyond. Which should lead to stellar earnings growth once trading conditions return to normal for its Land-based operations. As a result, I think the weakness in the Aristocrat Leisure share price is a buying opportunity for long-term focused investors.
Flight Centre Travel Group Ltd (ASX: FLT)
The Flight Centre share price is down a whopping 77% from its 52-week high of $49.14. Investors have of course been selling the travel agent’s shares due to the negative impact the coronavirus pandemic is having on bookings. With travel markets coming to a standstill, Flight Centre was left generating next to no revenue and still had considerable operating costs to pay. This led to the company having to undertake a material capital raising (which diluted shareholders greatly) to give it sufficient liquidity to survive the crisis.
Positively, Flight Centre appears to have raised enough funds now to see it through the crisis. It has also cut its operating costs materially, which should mean it operates a leaner business when travel markets return to normal. However, I’m not convinced the company will be profitable for a little while to come. In light of this, I wouldn’t be in a rush to invest right now.
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More reading
- Altium and 2 more ASX 200 shares to watch this week
- Why Domino’s and these ASX 200 shares have just hit new highs
- ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000
- 5 things to watch on the ASX 200 on Monday
- 5 ASX shares rated as strong buys by brokers
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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