Author: openjargon

It has been another busy week for Australia’s top brokers. This has led to the release of a number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Coronado Global Resources Inc (ASX: CRN)

According to a note out of Bell Potter, its analysts have retained their buy rating on this coal miner’s shares with an improved price target of $1.85. The broker is feeling very positive on Coronado Global’s outlook. This is thanks to improving production volumes and subsequent cost benefits following self-funded investments across its Australian and US operations. The broker expects this to generate improved free cash flow and shareholder returns going forward. Particularly given its belief that metallurgical coal prices will be strong over the long term due to supply constraints. It also sees potential for Coronado Global to participate in industry consolidation. The Coronado Global share price ended the week at $1.41.

Premier Investments Limited (ASX: PMV)

A note out of Citi reveals that its analysts have retained their buy rating and $36.00 price target on this retail conglomerate’s shares. Citi has been reviewing the potential merger of Premier Investments’ apparel brands with department store operator Myer Holdings Ltd (ASX: MYR). The broker is feeling positive about the proposal and believes it could support margin expansion for the latter. It also sees potential for significant synergies from the combination of the two parties. Another positive is that Citi is upbeat on the proposed spinoff of the Peter Alexander and Smiggle brands, which are expanding internationally. Overall, the broker thinks that buying Premier Investments gives investors an opportunity to gain exposure to both growth opportunities. The Premier Investments share price was trading at $30.52 on Friday.

Telstra Group Ltd (ASX: TLS)

Analysts at Goldman Sachs have reaffirmed their buy rating on this telco giant’s shares with an improved price target of $4.30. According to the note, the broker was pleased with Telstra’s decision to lift its mobile prices by $2 to $4. Goldman believes it will boost Telstra’s average revenue per user (ARPU) metric by $2.50 and demonstrates that mobile market rationality remains, particularly when combined with the recent Optus increase. In response to the update, the broker has lifted its earnings and dividend estimates for FY 2025 and FY 2026. The Telstra share price was trading at $3.82 at Friday’s close.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The ResMed Inc (ASX: RMD) share price hit some rough patches in the financial year just past.

Shares in the S&P/ASX 200 Index (ASX: XJO) healthcare stock closed out FY 2023 trading for $32.81. On 28 June, the last trading day of FY 2024, shares ended the day changing hands for $29.10 apiece.

That saw the ResMed share price down 11.3% over the financial year.

For some context, the ASX 200 gained 7.8% over this same period.

Here’s what happened.

What happened with the ResMed share price in FY 2024?

As you can see on the above chart, 3 August would have been an opportune time to sell your stock in the medical device manufacturer.

On 4 August, the ResMed share price closed the day down 9.3%. This slide would continue through to 25 September, by which point shares were down 36.7% from the 3 August close.

Investors began favouring their sell buttons following the release of the company’s full-year results.

Although revenue for the 12 months to 30 June 2023 was up 18% year on year to US$4.2 billion, gross margins shrank in the final quarter. This saw the company’s full-year gross margin decline by 0.8% to 55.8%, contrary to analyst expectations of improved margins.

The margin pressure looks to have come from higher manufacturing costs and an unfavourable product mix.

Now investors who bought the dip on 25 September will have seen the ResMed share price gain 35.7% from that day through to the end of FY 2024.

But those results could have been markedly better if not for the 13.2% sell-off on 24 June, the final week of FY 2024.

This came after pharmaceutical giant Eli Lilly And Co (NYSE: LLY) released some promising clinical test results from its sleep apnoea trial in the United States. Eli Lilly is evaluating tirzepatide to treat the condition in adults with obesity.

That success could potentially take a bite out of ResMed’s own addressable market.

What’s ahead for the ASX 200 healthcare share in FY 2025?

On Friday, the ResMed share price closed at $29.90, putting the ASX 200 stock up 2.75% in the early days of FY 2025.

But if Morgans is right, shares could run a lot higher from here.

“While weight loss drugs have grabbed headlines and investor attention, we see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers,” the broker recently noted.

Morgans added:

Although quarters are likely to remain volatile, nothing changes our view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.

The broker has an ‘add’ rating on the ASX 200 healthcare stock with a $34.11 target for the ResMed share price. That’s 14% above Friday’s close.

The post Why the ResMed share price tanked in FY 2024 and what to expect in FY 2025 appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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 ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Woolworths Group Ltd (ASX: WOW) stock price has risen 12% since early May from its 52-week low of $30.49 to $34.17 as of Friday’s close. However, as the chart below shows, it is still down more than 11% over the past year.

Investors may be wondering whether this is an opportunity or if it has risen as far as it can go for the foreseeable future.

Firstly, we shouldn’t anchor to an old share price – just because the Woolworths share price was $40 just over a year ago doesn’t mean it has a right to recover to that level any time soon.

Woolworths’ stock price is lower for a variety of possible reasons, but I’d attribute some of that to weak sales growth, including lessening inflation. While reducing inflation is a good thing for households, it means Woolworths has lost the tailwind for its sales.

Is the Woolworths stock price now fair value?

In the third quarter of FY24, Woolworths reported that its Australian food sales increased just 1.5% to $12.6 billion, while total third-quarter group sales increased 2.8% to $16.8 billion.

The broker UBS said its core Australian food sales were weak, causing the broker to reduce its estimate for Woolworths’ earnings per share (EPS) by 6.9% and 8.5% due to a few factors. UBS referred to lower Australian food and Big W earnings before interest and tax (EBIT), as well as lower dividends from Endeavour Group Ltd (ASX: EDV) after Woolworths sold shares. Meanwhile, UBS increased its estimate for New Zealand food EBIT.

The broker has a neutral rating on Woolworths stock because of the weakness in the food sales and a potential for further slowing at Big W.

A price target tells investors where the broker thinks Woolworths shares will be in 12 months. UBS has a price target of $32.50 on Woolworths shares, which is currently around 5% lower than its current level.

UBS forecasts that Woolworths could generate EPS of $1.32 in both FY24 and FY25, putting the current valuation at 26x forward earnings.

What could send the company higher?

Interest rate cuts could certainly help support the Woolworths stock price if and when they come. Investors may be more willing to pay a higher price for Woolworths’ earnings if safer investments (like bonds) don’t yield as much.

Warren Buffett, one of the world’s greatest investors, once described why interest rates are so important:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.

Over the long term, if the ASX share can grow its earnings, then that could lead to an increase in the Woolworths share price over time.

The broker UBS thinks Woolworths’ EPS could increase by 7.6% in FY26, 10.6% in FY27, and 10.8% in FY28. That’s not exactly rocketing growth, but I think it can help push up Woolworths shares over time if its profit keeps growing. The market usually judges a business by how much profit it’s making.

The post Up 12% from 52-week lows, is Woolworths stock still a buy? appeared first on The Motley Fool Australia.

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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.

Greater investment control is the No. 1 reason why about 1.15 million Australians are choosing to manage their own superannuation via a self-managed superannuation fund (SMSF), new research shows.

A survey of more than 2,000 investors conducted by online trading platform, Stake found 55% of respondents who had a self-managed superannuation fund set it up to gain more investment control.

More Australians are deciding to go this way, with 18,079 net self-managed superannuation funds set up in 2023, according to the Australian Taxation Office. This compares to 10,446 in 2022 and 11,262 in 2021.

ATO figures show there are 616,400 SMSFs in Australia today. Nine in 10 have just one or two members, equating to just under 1.15 million SMSF investors overall.

Superannuation provider Vanguard says the average age at which Australians are establishing their own SMSFs is younger than ever, at 46.

Renae Smith, Chief of Personal Investor, Vanguard Australia, said:

The sustained rebound in SMSF establishment rates reflects the growing interest and confidence among investors in managing their own superannuation funds and the autonomous nature of this cohort.

Their desire for control or choice over investment products or their fund’s asset allocation far outweighs the time, effort and complexity required in managing their funds.

Why do people want to manage their own superannuation?

The Stake survey revealed several other reasons why Australians had chosen to set up an SMSF.

The next most popular reason was the ability to buy property.

In March 2024, Australian SMSFs had $49.9 billion invested in residential property, up 11.5% year over year. There was also $91.9 billion invested in commercial property, also up 11.5%.

While SMSF owners cannot live in any residential property they own through their superannuation, they can run their own business out of a commercial property owned through their SMSF.

This is likely one of the reasons why there are more self-managed superannuation monies invested in commercial property than residential property.

The Stake survey also found cost-effectiveness was a driver for 27% of investors with SMSFs.

Additionally, 26% of SMSF investors said they felt there was greater potential for better returns if they managed their superannuation themselves.

Vanguard’s own research backs up this implied confidence.

Smith comments that SMSF trustees are nearly twice as likely to feel highly confident in funding their desired retirement lifestyle than members of APRA-regulated retail superannuation funds.

However, it’s worth noting that SMSF members tend to have more superannuation savings than average workers, which likely contributes to those higher confidence levels.

According to the latest full-year financial data published by the ATO (FY22), the average wealth per SMSF member is $780,254, and the median is $467,187.

This compares to an average superannuation balance of $404,553 and a median balance of $198,715 among all Australians aged between 65 and 69 years (the current ‘retirement age’ is 67 years).

ASX shares popular with SMSF members

Of the $933 billion managed through self-managed superannuation funds, $271 billion is invested in ASX shares. There is $145 billion in cash and term deposits and $122.5 billion in unlisted trusts.

Super Guide reports that the most popular ASX shares selected by SMSFs for investment are:

• BHP Group Ltd (ASX: BHP) shares (48% of SMSFs holding ASX shares are invested in BHP)
• Woodside Energy Group Ltd (ASX: WDS) shares (45.6%)
• Westpac Banking Corp (ASX: WBC) shares (40.9%)
• Commonwealth Bank of Australia (ASX: CBA) shares (39.1%)
• National Australia Bank Ltd (ASX: NAB) shares (38.9%)

As we recently reported, Vanguard says there has been a “shift in asset allocations”, with SMSF trustees doubling their allocation to exchange-traded funds (ETFs) in 2024.

The post Top 4 reasons why more Aussies are managing their own superannuation appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in BHP Group, Commonwealth Bank Of Australia, and Woodside Energy Group. 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.