Author: openjargon

The Nasdaq Composite Index (NASDAQ: .IXIC) took a sharp turn for the worse yesterday (overnight Aussie time).

By the time the smoke cleared, the tech-heavy index had ended the day down 2.0%.

Remarkably, the big Nasdaq sell-off came on the heels of some very promising inflation data out of the United States.

According to the US Bureau of Labor Statistics, inflation in the world’s top economy increased 0.1% in June from May. That’s the slowest inflationary increase in three years.

This news, as you’d expect, increased market expectations of a September interest rate cut from the US Federal Reserve. An expectation that has often offered significant tailwinds for tech stocks.

Yet the Nasdaq Index tumbled, pulled down by some of the world’s biggest and best-performing tech giants.

Shares in Apple Inc (NASDAQ: AAPL), for example, closed 2.3% lower. Alphabet Inc Class A (NASDAQ: GOOGL), or Google to you and me, shed 2.9%.

Then there’s star AI player Nvidia Corporation (NASDAQ: NVDA), whose share price tumbled by 5.6%.

And Elon Musk’s Tesla Inc (NASDAQ: TSLA) was among the worst performers, closing a hefty 8.4% lower overnight.

Now, here’s the interesting thing.

While the Nasdaq Index fell 2.0%, the small-cap Russell 2000 Index (RUSSELL: RUT) gained 3.6%. That’s the biggest lead the small-cap index has had on the Nasdaq since late 2020.

So, what’s going on?

Why didn’t the Nasdaq Index rally on subdued US inflation?

It appears that a sizeable and much-needed stock rotation is taking place. One that’s benefiting the horde of beaten down and recently neglected small-cap companies at the expense of the small cohort of mega-cap Nasdaq Index companies that everyone’s been buying.

“The big tech trade is turning on itself, yet the rest of the market is finally stepping in. The S&P 500 is down today, but this is the best kind of selloff you could hope for if you’re a long-term investor,” Ritholtz Wealth Management’s Callie Cox said (quoted by Bloomberg).

Janney Montgomery Scott’s Dan Wantrobski noted that the stock rotation that saw small-caps soar and the Nasdaq Index tank is an early sign of a healthy expansion in overall market breadth.

“This fanning out from the narrow leadership areas throughout much of this year is what we would like to see continue over the coming weeks and months in order to confirm a healthier expansion cycle on a longer-term basis,” Wantrobski said.

Charles Schwab’s Kevin Gordon added:

It’s a pretty swift reversal in the momentum trade, and that tends to benefit the laggards to a significant degree. No question it’s in response to the fact that the prospect of rate cuts helps companies that have been struggling in the ‘higher for longer environment’.

In the longer term, the Nasdaq Index remains up an impressive 33% over 12 months. That’s three times the 11% one-year gain posted by the Russell 2000 small-cap index.

The post Why did the Nasdaq Index take a dive on promising US inflation data? appeared first on The Motley Fool Australia.

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• Is it too late for ASX investors to start buying US shares?
• Which ASX shares could soar if AI falls into a $500 billion hole?
• Why ASX investors are ‘flocking back’ to BHP shares and these other top stocks
• Which US shares are ASX investors buying in 2024?
• Prediction: 2 US stocks that will be worth more than Nvidia 5 years from now

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Alphabet, Apple, Nvidia, and Tesla. The Motley Fool Australia has recommended Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX small-cap shares might be experiencing a resurgence if recent market trends hold.

The S&P/ASX Small Ordinaries Index (ASX: XSO) – a proxy for Australian small caps â€“ is up nearly 1.3% in the past week.

Meanwhile, the large-cap S&P/ASX 200 Index (ASX: XJO) is up around 0.7%.

But the picture is reversed when looking back at the past 12 months. In that time, the ASX 200 is up nearly 9%, whereas the small-cap index is up just 5%.

As a reminder, small-cap shares are typically those companies with a market capitalisation below $2 billion but above the $100–200 million mark.

According to StockTwits on X, there was a “huge rotation out of tech and into small caps” in the US session on Thursday.

That strength has continued on the ASX today, with the small-cap index up more than 1.1%. The ASX 200 has yet to break the 1% barrier.

Is the tide beginning to turn for ASX small-cap shares? Let’s take a look.

ASX small-cap shares to rise?

Global share markets were on edge on Thursday after the US released June consumer price index (CPI) data.

Core CPI for June came in at 3.3% year over year, below the market’s expectations of 3.4%.

Speaking to US Congress on Wednesday, Federal Reserve Chair Jerome Powell said the US was “no longer an overheated economy”.

This is en economy…that is more of less back by most measures to where it was before the pandemic.

We’re well aware that we now face two-sided risks and have for some time.

The unexpected decline triggered movements in large-cap stocks. Major tech stocks experienced notable declines, even though many had recently hit record highs, so a pullback had been anticipated.

Nevertheless, the data has some speculation that the Federal Reserve might cut interest rates as early as September.

Small-cap shares are “more vulnerable to recent interest rate rises”, according to JP Morgan Asset Management, so this helps explain the recent movements.

According to Charles-Henry Monchau, Syz Group’s CIO, the odds of a rate cut by September 2024 have skyrocketed to 83%.

Meanwhile, The Australian Financial Review reported the probability of a rate cut could be as high as 90%.

Before the June CPI report, the odds were 67%.

Scotiabank said the likelihood of a rate cut is now higher. Analyst Derek Holt commented, per The AFR:

Another softer core CPI reading makes our forecast for 50 basis point cuts this year starting in September look a little light.

The money that rolled into smaller equities on Thursday continues a trend that has been in place on the ASX since the start of the new financial year.

Since July began, the small-cap shares index is up 2.2%, compared to the ASX 200’s 2.2% return at the time of writing.

What ASX small-caps performed in FY24?

Two small-cap shares have caught serious investor attention of late, resulting in large gains in their stock prices.

The first is Droneshield (ASX: DRO). The counter-drone technology company saw its shares soar by over 647% in FY24, as seen below.

Investors are bullish on the company after several updates. For one, it secured a number of repeat orders of its counter-drone technology from the US Military. Secondly, its financial results saw revenues grow 900% year over year in Q1 CY 2024 to $16.4 million.

Tamim Asset Management is bullish on the company, noting it is “well-positioned to capitalise on the increasing need for effective counter-drone technologies”.

Another small-cap player currently outperforming is Zip Co Ltd (ASX: ZIP). The buy now, pay later (BNPL) company experienced a 256% increase in its share price during FY24.

Zip is now focused on key markets to drive revenue growth after a challenging period due to the pandemic.

The stock is rated a buy from Ord Minnett, and the consensus verdict is also a buy from analysts, according to CommSec.

Takeouts

ASX small-cap shares may be back in vogue, driven by a broader market shift and some impressive company performances.

Just remember that small-cap stocks may be more volatile and that you should always conduct your own thorough due diligence.

The post Are ASX small-cap shares back in vogue amid a big shift? appeared first on The Motley Fool Australia.

More reading

• Would I be crazy to buy DroneShield shares now at over $2?
• Is it too late to buy Zip shares at their 2-year highs?
• 3 ASX small-cap shares that soared 250% to 675% in FY24
• Up 327% in a year, the Zip share price just smashed new multi-year highs!
• Why DroneShield, GenusPlus, Monadelphous, and Telstra shares are roaring higher today

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow 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 DroneShield, JPMorgan Chase, and Zip Co. 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.

It has been another busy week for many of 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 right now:

Aristocrat Leisure Limited (ASX: ALL)

According to a note out of Citi, its analysts have retained their buy rating on this gaming technology company’s shares with an improved price target of $59.00. The broker has been looking into industry data and believes that Aristocrat’s key RAID mobile game has returned to bookings growth after a subdued period. And while it suspects that its Social Casino bookings could be down slightly year on year, it expects this to still be significantly better than the broader market. In light of this and its positive outlook, the broker remains bullish and sees value in its shares at current levels. The Aristocrat share price is trading at $52.44 on Friday.

CAR Group Limited (ASX: CAR)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating on this auto listings company’s shares and lifted their price target on them to $41.40. The broker has been looking at CAR Group’s near-term earnings outlook ahead of its FY 2024 results. The good news is that Goldman remains confident that despite foreign exchange and Trader Interactive dealer headwinds, the carsales.com.au operator is well-placed to continue delivering >10% per annum earnings growth for the foreseeable future. As a result, the broker thinks that CAR Group’s shares are undervalued at current levels and remain its preferred classified stock heading into earnings season. The CAR Group share price is trading at $34.61 at the time of writing.

Nextdc Ltd (ASX: NXT)

Analysts at Macquarie have retained their outperform rating and $20.00 price target on this data centre operator’s shares. According to the note, Macquarie is feeling very positive about NextDC’s outlook. It highlights that the artificial intelligence boom and migration to the cloud will continue to drive increased demand for data centre capacity over the medium term. This is particularly the case given the need for space in centres for ChatGPT type platforms and cloud GPU services. All in all, Macquarie believes the future is bright for this data centre leader and thinks it could be a top pick for investors. The NextDC share price is fetching $18.23 today.

The post Brokers name 3 ASX shares to buy now appeared first on The Motley Fool Australia.

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• Buy this ASX tech stock for a 20%+ return: Goldman Sachs
• 5 things to watch on the ASX 200 on Friday
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• Goldman Sachs names 1 ASX 200 stock to buy and 2 to hold
• 5 things to watch on the ASX 200 on Thursday

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in Nextdc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Car Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The value of the Australian ASX exchange-traded fund (ETF) industry hit a new record high in May.

About $198.3 billion is invested in ETFs, according to the latest update from ETF provider BetaShares.

ETFs are an increasingly popular investment method, providing instant diversification in a single trade. New figures from the ASX quantify the total returns of ETFs over the past three financial years.

In this article, we reveal the top five performers for total investor returns over the period FY22 to FY24.

Top 5 ASX ETFs for total returns

This article focuses on ETFs that invest only in Australian shares. They include index-based and sector-based ETFs, as well as those operating under a specific strategy designed by their ETF provider.

We’ve included each ETF’s management expense ratio (MER), which is the fee you pay for each provider’s management of the ETF.

Fees can vary widely between providers, so this is always worth checking out in your research.

According to the data, here are the top five ETFs:

BetaShares Geared Australian Equity (Hedge Fund) ETF (ASX: GEAR)

The BetaShares Geared Australian Equity (Hedge Fund) ETF returned an average of 12.79% per annum. The historical distribution yield is 2.25%. The MER is 0.8%.

The GEAR ETF’s top three exposures are BHP Group Ltd (ASX: BHP) shares at 9.8% weighting, Commonwealth Bank of Australia Ltd (ASX: CBA) at 8.7%, and CSL Ltd (ASX: CSL) at 5.9%.

VanEck Australian Banks ETF (ASX: MVB)

The VanEck Australian Banks ETF returned an average of 12.79% per annum. The historical distribution yield is 5.46%. The MER is 0.28%.

The MVB ETF’s top three exposures are National Australia Bank Ltd (ASX: NAB) shares at 20.34% weighting, CBA shares at 20.02%, and Westpac Banking Corporation (ASX: WBC) at 19.89%.

SPDR S&P/ASX 200 Financials EX A-REIT ETF (ASX: OZF)

The SPDR S&P/ASX 200 Financials ex-REIT ETF returned an average of 11.86% per annum. The historical distribution yield is 4.6%. The MER is 0.34%.

The OZF ETF’s top three exposures are CBA shares at 29.25% weighting, NAB at 15.42%, and Westpac at 12.98%. This financials ETF excludes real estate investment trusts (REITs).

BetaShares Australian Financials Sector ETF (ASX: QFN)

The BetaShares Australian Financials Sector ETF returned an average of 11.63% per annum. The historical distribution yield is 3.1%. The MER is 0.34%.

The QFN ETF’s top three exposures are CBA shares at 29.2% weighting, NAB at 15%, and Westpac stock at 13%.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The Vanguard Australian Shares High Yield ETF returned an average of 10.91% per annum. The historical distribution yield is 5.84%. The MER is 0.25%.

The VHY ETF’s top three exposures are CBA shares at 9.89% weighting, BHP at 8.82%, and NAB at 7.75%.

The post Which Australian shares ASX ETFs have dished out the best returns over 3 years? appeared first on The Motley Fool Australia.

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• Why it’s a big day for ASX ETFs
• Is the Vanguard Australian Shares High Yield ETF (VHY) a good long-term buy?
• Want the latest Vanguard Australian Shares Index ETF dividend? Here’s what to do
• Buy these ASX ETFs in July for passive income
• 3 top ASX ETFs to buy in July

Motley Fool contributor Bronwyn Allen 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 Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A2 Milk Company Ltd (ASX: A2M) shares ended up having a stellar finish to the year in FY24.

In total, shares in the specialty milk company rose 38%, starting the year at $4.89 and closing the period at $6.77 apiece.

Most of this was achieved in the second half, as seen in the chart below.

Leading into the New Year, the stock was trading at $4.26 before exploding to 52-week highs of $7.33 on 28 May.

With A2 Milk shares up more than 2.5% in the past week, the question is, will FY25 be a similar affair?

Drivers of A2 Milk shares

There was a buying thrust in A2 Milk shares after the company’s H1 FY24 earnings report in February. In it, A2 Milk reported a 3.7% increase in revenue to NZ$812.1 million.

This growth was underscored by A2 Milk’s continued expansion in its China and Other Asia markets, with sales up 16.5% in those regions.

Sales of infant milk formula (IMF) in China were up 10.4% alone. Meanwhile, its Australia and New Zealand business saw a 24.1% decrease compared to H1 FY23.

Net profit after tax (NPAT) was also up 15.6% year over year and management forecasts “low to mid-single-digit” revenue growth for FY24, according to my colleague James.

In May it voted in favour of a $130 million loan to Synlait Milk Ltd (ASX: SM1), in which it holds a nearly 20% stake.

According to my colleague Bernd, the loan, provided by Bright Dairy, aims to support Synlait’s recapitalisation plan. Bright owns around 40% of Synlait Milk.

What are brokers saying for FY25?

Brokers have a mixed yet generally optimistic outlook on A2 Milk shares.

In an April note, Bell Potter rated the company a hold with a $5.70 price target on its stock. It said that while the company’s transition has been executed well, its shares could be fully valued.

Despite its recent Growth in China, Bell Potter is weary, saying imports are “at historically low levels and has been since Jun 2023”.

On the other hand, Ord Minnett rated A2 Milk a buy in a February note. It has a $7.40 price target for the share, implying a 7.5% potential upside from the current price.

Analysts at Citi are also bullish on the stock and reaffirmed the firm’s buy rating in June. It values the company at $7.85 per share.

Meanwhile, consensus rate A2 Milk shares a hold according to CommSec. The split is three buys, five holds and one sell.

Foolish takeout

As we walk through FY25, A2 Milk shares continue to push higher. They are up more than 1.5% since trading began in the new financial year, and up 36% in the past twelve months. As always, remember to conduct your own due diligence.

The post Here’s why A2 Milk shares soared in FY24. Will it happen again? 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 Zach Bristow 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 A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Immutep Ltd (ASX: IMM) shares are ending the week with a bang.

In morning trade, the ASX healthcare stock is up 25% to 37 cents.

Why is this ASX healthcare stock rocketing?

This clinical-stage biotechnology company’s shares are taking off this morning after it announced positive results from Cohort B of the TACTI-003 Phase IIb trial.

This trial is evaluating eftilagimod alfa (efti) in combination with Merck & Co’s anti-PD-1 therapy Keytruda (pembrolizumab) as a first-line treatment of recurrent or metastatic head and neck squamous cell carcinoma patients (1L HNSCC) with negative PD-L1 expression.

The release notes that the updated efficacy and safety data was presented by Dr. Robert Metcalf from the Christie NHS Foundation Trust during an oral presentation at the ESMO Virtual Plenary session on Thursday.

Dr Metcalf revealed that the investigational immuno-oncology (IO) combination utilising efti and Keytruda achieved an objective response rate (ORR) of 35.5% (11 of 31 evaluable patients). He also reported a disease control rate (DCR) of 58.1%, according to RECIST 1.1, in 1L HNSCC patients whose tumours do not express PD-L1 (Combined Positive Score [CPS] <1).

Is this good?

The above may read like gobbledygook if you’re not familiar with clinical trials. But in summary, these are very positive and promising results.

In fact, the company notes that these results are “among the highest recorded for a chemotherapy-free approach in negative PD-L1 patients and compare favourably to a historical control of 5.4% ORR and 32.4% DCR from anti-PD-1 monotherapy.”

Commenting on the trial results, Dr Metcalf said:

The high response rate from this novel immunotherapy combination is well above other treatment approaches without chemotherapy. It matches historical response rates from chemotherapy-based treatments but without the associated toxicities. This is really significant for patients with head and neck squamous cell carcinomas who have a CPS less than one and for whom chemotherapy is the current first line treatment.

Achieving complete responses in this group bodes well for this immunotherapy combination’s future potential, especially given the positive trend in response durability. The clinically meaningful response rate and high unmet medical need warrant further investigation of eftilagimod plus pembrolizumab in this patient population.

In light of this data and the high unmet medical need, Immutep advised that it will discuss the path forward with regulatory agencies. And as Efti has previously received FDA Fast Track designation in 1L HNSCC regardless of PD-L1 expression, these are promising times for the company. Though, there is still a long road ahead.

The post Why is this ASX healthcare stock rocketing 25% on Friday? 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 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.

BHP Group Ltd (ASX: BHP) shares are under pressure on Friday morning.

At the time of writing, the mining giant’s shares are down over 1% to $43.09.

Why are BHP shares falling?

Investors have been selling the Big Australian’s shares this morning after it dropped a major bombshell announcement.

According to the release, BHP will temporarily suspend its Nickel West operations and West Musgrave project (Western Australia Nickel) from October.

This won’t be a short term suspension. BHP advised that it intends to review the decision to temporarily suspend Western Australia Nickel by February 2027. That’s up to two and a half years away.

Management has blamed the suspension on weak nickel prices and expectations for prices to remain at low levels for the foreseeable future due to “oversupply in the global nickel market.”

It highlights that “forward consensus nickel prices over the next half of the decade have fallen sharply reflecting strong growth of alternative low-cost nickel supply.”

What will this cost?

BHP advised that during the temporary suspension, it will continue to support its workforce and local communities. It plans to invest approximately US$300 million (A$450 million) per annum following completion of a transition period to support a potential re-start of Western Australia Nickel.

Among the assets that are being suspended are the Kwinana nickel refinery, Kalgoorlie nickel smelter, and Mt Keith and Leinster operations, as well as the development of the West Musgrave project.

BHP’s Australian President, Geraldine Slattery, commented:

Since BHP announced a review of Western Australia Nickel in February, we have explored options to stem losses in the short-term and identify a viable path forward for the business. Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel. We have made the difficult but necessary decision to temporarily suspend the Nickel West operation and West Musgrave project.

We will continue to invest approximately AU$450 million (US$300 million) per annum in the Western Australia Nickel facilities to enable a potential re-start. Western Australia remains an important investment destination for BHP globally, with investment in the State expected to be greater than AU$12 billion over the next five years and we will continue to work with all of our Western Australian partners to advance the economic prosperity of the State.

BHP shares are down almost 15% since the start of the year.

The post BHP shares tumble on nickel bombshell appeared first on The Motley Fool Australia.

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• Is it time to dive back into ASX lithium shares?
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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 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.

Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW) shares are popular options for blue chip investors.

Both are high quality businesses with a collection of recognisable brands.

Wesfarmers is the name behind Bunnings, Kmart, Target, Officeworks, Priceline, Silk Laser Clinics, and WesCEF, to name just a few.

Whereas Woolworths Group operates businesses such as the eponymous Woolworths supermarket brand, Big W, Petstock, and PFD Food Services.

Given how their businesses overlap in many ways, having just one of them in a portfolio makes sense. But which one should you buy right now? Let’s see which one Goldman Sachs rates as the buy.

Wesfarmers or Woolworths shares?

According to recent notes, Goldman Sachs thinks that Woolworths shares are the standout pick of the two.

It currently has a conviction buy rating on its shares with a price target of $40.20. This implies potential upside of 17% for investors over the next 12 months.

The broker believes that share price weakness over the past year has created a compelling buying opportunity in a high quality company with defensive earnings. It commented:

WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.

Goldman isn’t feeling as positive about Wesfarmers’ shares. It currently has a neutral rating and $68.80 price target on its shares. This suggests that upside of just 2.2% is possible from current levels.

While the broker is a fan of the company, and particularly the Bunnings business, it just doesn’t see enough value in its shares at current levels. It explains:

Wesfarmers is a conglomerate that operates across a range of industries with ~65% of EBIT coming from Bunnings, a household hardware chain. We expect Bunnings to be more resilient vs. other household related retailers, with buoyant median house price expectations signaling higher property transactions/alts & adds to come. Additionally, we also expect a resilient Bunnings to generate ~A$2.0B of free cash flow each year to FY26 to further fund two new growth platforms with 1) Health, including further scaling into high growth and high margin non-invasive aesthetics business; and 2) Lithium, with high quality, low cost and access to capital a notable advantage. That said, WES in our view is now fairly priced to reflect these growth prospects. We are Neutral rated on the stock.

So, as far as Goldman Sachs is concerned, Woolworths shares are the way to go for blue chip investors.

The post Wesfarmers vs Woolworths: Which are the best ASX shares to buy today? appeared first on The Motley Fool Australia.

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• Why did the Woolworths share price sink 15% in FY 2024?
• How much cash do you need to quit work and live off ASX dividend income?
• The Wesfarmers share price rocketed 32% in FY 2024! Here’s how
• 2 ASX shares to buy for a retirement portfolio in FY25
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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 positions in and has recommended Goldman Sachs Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

After crashing deep into the red over the past 12 months, Core Lithium Ltd (ASX: CXO) shares could now be close to their bottom.

That’s the view of analysts at Goldman Sachs, which have just taken their sell rating off the lithium miner’s shares.

What is Goldman Sachs saying about Core Lithium shares?

Goldman has been tipping Core Lithium as a sell for some time. And with its shares losing 90% of their value since this time last year, it certainly would have paid to listen to the broker.

And while its analysts are becoming a little more upbeat on the lithium miner, this shouldn’t necessarily be interpreted as a signal to buy.

According to a note from earlier this week, the broker has upgraded Core Lithium’s shares to a neutral rating with an 8 cents price target.

This price target is still a sizeable 20% below where its shares currently trade because of some solid gains this week in response to a couple of promising updates.

Why did the broker upgrade its shares?

Goldman believes that the company’s restart risk is now priced in and highlights its strong cash balance. It said:

While we still expect developers to underperform ramped up producers into the declining lithium price environment, we upgrade CXO to Neutral on valuation, with ongoing production restart risk now more priced in at 1.1x NAV (peers 0.8-1.0x NAV) or pricing ~US$1,170/t LT spodumene, and ~40% of CXO’s market cap now in cash on hand (with no debt) potentially partially mitigating exposure to falling lithium prices.

Since we added CXO to the Sell list on 20 Nov 2023, the CXO share price has fallen ~76%, underperforming ASX lithium peers and spodumene/ carbonate/ hydroxide prices down 15-30% over the same period, with the ASX 200 up +11%. We update our valuation methodology to 100% NAV (from 75% NAV, 25% EV/EBITDA multiple), with a return to production and cashflow unlikely in the near-term, in our view, and lower our PT to A$0.08/sh.

The broker also highlights that there is reason to be optimistic from Core Lithium’s exploration activities. Though, it concedes that any real benefits from this are unlikely to be realised in the immediate term. It adds:

Though further exploration is underway, and while potential resource expansion could be promising (including revisiting the gold, uranium and base metal exploration projects), with resource extension likely at depth/from new areas, we see limited near-term upside (particularly as new projects likely require additional funding), where further meaningful exploration is now also likely longer dated on falling lithium prices, particularly with a near-term restart of the operation now unlikely in the near-term.

In light of the above, Goldman thinks investors should keep their powder dry for the time being.

The post Why did Goldman Sachs just upgrade Core Lithium shares? 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 positions in and has recommended Goldman Sachs Group. 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.