Author: openjargon

The Australian share market may be trading near its record high but that hasn’t stopped some ASX 300 shares from hitting new 52-week lows.

Three such shares that have made these unwelcome milestones are listed below. Is this recent weakness a buying opportunity for investors or should investors keep their powder dry? Let’s find out.

Australian Clinical Labs Ltd (ASX: ACL)

The Australian Clinical Labs share price hit a 52-week low of $2.24 this morning. This was driven by the release of a trading update from the struggling pathology services provider.

That update reveals that management continues to expect to achieve underlying EBIT at the low end of its $60 million to $65 million guidance range. This is based on unaudited management accounts to 30 April and assumes market volumes continue at current trends.

Ord Minnett is likely to see this as a buying opportunity. A recent note reveals that its analysts have an accumulate rating and $3.50 price target on the ASX 300 share.

Sonic Healthcare Ltd (ASX: SHL)

Another ASX 300 share hitting a new 52-week low on Tuesday has been fellow pathology provider Sonic Healthcare. Its shares sank to $23.58 after investors reacted badly to the release of an earnings update.

Management advised that it is now forecasting FY 2024 EBITDA of approximately $1.6 billion on revenues of approximately $8.9 billion. The former is short of its guidance range of $1.7 billion to $1.8 billion. This is due to inflationary pressures on the business, and exacerbated by currency exchange headwinds.

Looking ahead, Sonic expects to return to growth in FY 2025 and has pencilled in EBITDA of $1.7 billion to $1.75 billion for the 12 months.

Morgans is likely to see this weakness as an opportunity for investors. It currently has an add rating and $34.94 price target on its shares. Though, this recommendation could change once it has updated its financial model.

Telstra Group Ltd (ASX: TLS)

The Telstra share price dropped to a 52-week low of $3.57 after the telco released an update on its guidance.

Telstra has reaffirmed its guidance for FY 2024 and introduced its guidance for FY 2025. The latter sees the ASX 300 share target underlying EBITDA of $8.4 billion to $8.7 billion. This is up from its FY 2024 guidance of $8.2 billion to $8.3 billion. A key driver of its growth will be a $350 million cost reduction.

Goldman Sachs has responded to the update. While it was disappointed with the FY 2025 guidance, it has retained its buy rating and $4.55 price target on Telstra’s shares for the time being.

The post 3 ASX 300 shares hitting new 52-week lows: Are they cheap buys? appeared first on The Motley Fool Australia.

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• Telstra share price slips amid 2,800 cuts for growth
• Should you buy Telstra stock on a pullback?
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• Here are 3 reliable ASX shares I’d buy instead of the big four banks right now

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 Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Top broker Goldman Sachs has a sell rating on three popular ASX retail shares amid today’s high interest rates, weak retail sales, and the most protracted period of negative consumer sentiment in 30 years.

In a recent note, Goldman analysts Lisa Deng and James Leigh said there is “better value” in ASX consumer staples than discretionary shares right now.

They noted that several ASX discretionary retail shares were trading at elevated price-to-earnings (P/E) ratios, and the broker’s earnings forecasts for FY25 on those stocks were 5% to 10% below consensus.

The shares include JB Hi-Fi Ltd (ASX: JBH), Flight Centre Travel Group Ltd (ASX: FLT), and Premier Investments Limited (ASX: PMV), and in a new ratings update the broker has a sell rating on all of them.

The state of play in retail

The latest Westpac Consumer Sentiment data reveals persistently low consumer sentiment over the past two years that shows “few signs of lifting”, according to senior economist Matthew Hassan.

Hassan commented:

Indeed, outside of the deep recession of the early 1990s, this is easily the second most protracted period of deep consumer pessimism since we began surveying in the mid-1970s, with all other sentiment slumps lasting nine months or less.

Deng and Leigh said shoppers were “clearly increasingly value-focused” amid likely delays in rate cuts. (The broker recently changed its projected timeline for a rate cut from August to November.)

The latest retail figures from the Australian Bureau of Statistics (ABS) support this view. The data revealed the “weakest growth on record” outside the pandemic and the introduction of the GST.

Retail turnover rose by just 0.8% over the 12 months to 31 March, despite significant population growth.

Turnover fell by a seasonally adjusted 0.4% in March, following a 1% lift in January and a 0.2% rise in February.

ABS head of retail statistics Ben Dorber said consumers had pulled back on spending in March amid high cost-of-living pressures.

3 ASX retail shares to sell

Deng and Leigh commented that recent 3Q24 company results, channel checks, and the latest ABS retail data suggested Australian consumers were “increasingly price-conscious and selective about spending”.

In their recent note, Deng and Leigh re-rated several ASX retail shares.

Their recommendations included six shares to buy, seven with neutral ratings, and three to sell, as follows.

JB Hi-Fi shares

The JB Hi-Fi share price is $57.53, up 1.72% currently and up 5.7% in the year to date.

Goldman has a 12-month share price target of $50 on this popular ASX retail share.

Deng and Leigh downgraded JB Hi-Fi shares from a neutral to sell rating, commenting:

We cut FY24-26e EBIT by 3-4% and EPS by 3-5% given softer growth in the Electronics category as well as rising competition, particularly for JBH AU, most noticeably from Officeworks.

Our FY25e EBIT and EPS are ~6% below Factset consensus.

Premier Investments shares

The Premier Investments share price is $29.59, down 0.37% currently and 4.89% higher in the year to date.

Goldman has a 12-month share price target of $25.10 on the owner of Just Jeans and Peter Alexander.

Flight Centre shares

The Flight Centre share price is $20.58, up 0.68% currently and 0.64% higher in the year to date.

Goldman has a 12-month share price target of $18.30 on this ASX retail travel share.

The post Dump ’em! Top broker says sell these 3 ASX retail shares appeared first on The Motley Fool Australia.

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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 positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Flight Centre Travel Group, Jb Hi-Fi, and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) closed up a stellar 1.4% on Tuesday 7 May.

This great run was fuelled by the Reserve Bank of Australia’s meeting on the day, which saw the central bank leave Australia’s official interest rate steady at 4.35%.

However, the minutes of the RBA’s meeting, released today, reveal that ASX 200 investors came closer than many expected to witnessing another rate hike as the inflation outlook remains highly uncertain.

The ASX 200 is down 0.2% in early afternoon trade today.

Here’s what we learned from the RBA’s inflation outlook and interest rate expectations.

ASX 200 investors dodged a rate rise bullet

It turns out the speculations of another potential 2024 interest rate increase from the RBA weren’t so far out of the ballpark after all.

And judging by the tone of the RBA board’s minutes, ASX 200 investors shouldn’t write off this possibility just yet.

In the meeting, chaired by Governor Michele Bullock, the RBA noted:

Raising the cash rate at this meeting could be appropriate if the board formed a view that the judgements underpinning the staff forecasts risked being overly optimistic about the forces that would drive down inflation, leaving the balance of risks tilted to the upside.

Among the bigger inflationary concerns that could lead to ASX 200 investors having to bear another rate hike is Australia’s tight labour market.

“Labour market conditions had eased by less than had been anticipated three months earlier,” the RBA said. “Conditions in the labour market appeared to be tighter than those consistent with full employment.”

The board also noted that while inflation had eased further in the March quarter “the pace of disinflation had slowed and the recent inflation data were stronger than had been expected in February”.

Indicating how close Australia was to another interest rate hike, the RBA said “Most of the data received since the previous meeting had been stronger than expected.”

According to the minutes:

Taken together, these data suggested that there may be somewhat less slack in the economy than previously assessed. Inflation in Australia had declined more slowly than anticipated. Conditions in the labour market had eased by less than expected over prior months and were tighter than those consistent with full employment.

In what was good news for the ASX 200 on the day, the final decision was to leave the cash rate unchanged.

At least, for now.

“Members agreed that it was important to convey that recent data and other information had signalled that the risks around inflation had risen somewhat,” the board highlighted.

Noting “the considerable uncertainty about the outlook for both inflation and the labour market”, the RBA’s board members “agreed that it was difficult either to rule in or rule out future changes in the cash rate target”.

The post The ASX 200 was almost hit by an RBA interest rate hike in May. Now what? 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 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.

The Star Entertainment Group Ltd (ASX: SGR) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) casino operator were down 10.1% in earlier trade at 48.5 cents. After some likely bargain hunting, shares have recouped much of those losses, currently trading for 52.5 cents apiece, down 2.8%.

For some context, the ASX 200 is down 0.2% at this same time.

This comes after another update on media speculations surrounding potential takeover discussions with Hard Rock International.

Hard Rock responds

As the Motley Fool reported yesterday, Star had confirmed media rumours saying it has received interest from “a number of external parties regarding potential transactions”.

Management noted that they were not yet in “substantive discussions”. But that didn’t stop the Star Entertainment share price from soaring after coming out of the morning trading halt, ending the day up 20.0%.

The big rally may have been driven by the rumours of Hard Rock’s potential interest in the stock.

Yesterday, The Australian Financial Review cited sources close to Star had indicated Hard Rock Hotels and Casinos was among those external parties potentially interested in acquiring the embattled casino operator.

Overnight, the United States-based global chain denied that in no uncertain terms.

According to Hard Rock:

Any misuse of the Hard Rock name in unauthorised business dealings is taken very seriously. We are currently investigating this matter and will pursue all necessary legal actions to protect our brand and reputation.

Star Entertainment released an update in response to the media speculation during trading hours yesterday.

“The Star confirms that it has not received a proposal directly from Hard Rock Hotels and Casinos (Hard Rock),” the company noted.

Star continued:

However, the company has received inbound interest from a number of other external parties regarding potential transactions including a consortium of investors which includes the entity Hard Rock Hotels & Resorts (Pacific), which The Star understands is a local partner of Hard Rock.

The nature of the interest to date has been confidential, unsolicited, preliminary and non-binding. At this stage, none of the approaches has resulted in substantive discussions.

To clarify its position following Hard Rock’s litigation threats, Star Entertainment followed up with another statement this morning:

The company today notes the statement issued by Hard Rock International which clarifies that Hard Rock International is not involved in, nor has it authorised, any discussions, activities or negotiations on its behalf in connection with a proposal for The Star.

Star Entertainment share price snapshot

The Star Entertainment share price is down 55% over the past full year. But shares in the ASX 200 casino operator look to have found support over the past months, with shares down just over 1% in 2024.

The post Star Entertainment share price dives 10% on Hard Rock update 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 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.

The Telstra Group Ltd (ASX: TLS) share price is weakening on news the telecom giant plans to oust up to 2,800 employees.

Despite the move being marketed as necessary, shares in Australia’s thirteenth-largest listed company are down 2.1% to $3.60 in light of the update. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) — Australian investors’ yardstick — is only 0.1% lower.

Resetting costs during ‘ongoing inflationary pressures’

Today, Telstra announced it will begin a ‘reset’ of its enterprise business. Up to 2,800 employees are expected to be removed as part of this restructuring.

The decision follows a review of the declining product segment, which experienced a 66.7% fall in earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the first half of FY2024. Telstra noted a decline in connectivity and calling at that time, dragging the division’s EBITDA down from $213 million to $71 million.

Telstra CEO Vicki Brady described the impetus behind the decision, saying it’s needed to accommodate continued investments to deal with ‘ever-increasing growth in data volumes’ and provide better connectivity for its customers.

Yet, the Telstra share price is still moving lower today.

Additionally, Brady highlighted the tough backdrop Telstra is facing, stating:

This is occurring within a dynamic environment, with an evolving competitive landscape, rapid advances in technology, changing customer needs, and the ongoing inflationary pressures facing all businesses.

To reduce costs, Telstra highlights the following key items:

• Reducing the number of network applications and services (NAS) products by almost two-thirds
• Simplifying its sales and service model, and
• Reducing the cost base of its tech services, with a particular focus on NAS products

Telstra management expects the majority of the cuts will be complete by the end of the year.

Finally, the telco is also scrapping annual inflation-linked postpaid mobile plan price reviews.

What about earnings guidance?

Making swift and broad cuts comes at a cost. Telstra is pencilling in $200 million to $250 million in one-off restructuring costs between FY24 and FY25. Although, these costs will not be included in the company’s guidance.

Speaking of which… Telstra reaffirmed its FY24 guidance and pulled back the curtain on FY25. The company forecasts $8.4 billion to $8.7 billion in underlying EBITDA in the next financial year, reassuring investors that it is committed to achieving its ‘T25’ goals.

Has the Telstra share price lagged the market?

The Telstra share price is down 16% compared to last year. This is a distinct departure from the return of the Australian benchmark, which was roughly 8% over the same timeframe.

Even after dividends, Telstra’s returns over the past 12 months are negative. Profits have increased slightly during this time. However, revenue and net profits after tax remain noticeably lower than at the end of 2018.

The post Telstra share price slips amid 2,800 cuts for growth appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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.

I’m always on the lookout for ASX shares that seem too cheap to ignore. Buying great value stocks can lead to outperforming the S&P/ASX 200 Index (ASX: XJO) over the longer term.

Cheap can mean several different things, such as trading at a large discount to the business’ net asset value (NAV). In this article, I’ll focus on companies that trade on a low price/earnings (P/E) ratio.

I believe the market is materially undervaluing the long-term growth prospects of the below ASX shares.

GQG Partners Inc (ASX: GQG)

GQG is a funds management business based in the US. One of the stock’s appealing factors is that it’s growing geographically in places like Canada and Australia, expanding its potential customer base.

The company has deliberately set up its funds to have minimal (or no) performance fees, meaning management fees generate the significant majority of its revenue and profit. Therefore, higher funds under management (FUM) is a key driver of earnings.

At 31 December 2023, GQG had FUM of US$120.6 billion. The FUM rose 17.7% to US$142 billion at 30 April 2024, driven by strong investment performance and net inflows of US$6.3 billion for 2024 to date. I’m expecting more inflows over the rest of 2024 with clients attracted to GQG’s funds’ ability (thus far) to deliver long-term outperformance of their respective benchmarks.

The ASX share has committed to a generous dividend payout ratio of 90% of distributable earnings. Based on the forecast on Commsec, the GQG share price is valued at under 11x FY25’s distributable earnings, which looks cheap to me.

Close The Loop Ltd (ASX: CLG)

This company is heavily involved in the circular economy.

It collects, sorts, reclaims and reuses resources and materials that would otherwise go to landfill, such as electronic products, print consumables and cosmetics. Close The Loop also enables the reusing of toner, and utilises post-consumer plastics for an asphalt additive. Finally, the company creates packaging that includes recyclable and made-from-recycled content.

In a world where countries, companies and households are looking to reduce their impact on the planet, this company operates in an attractive area of the economy with growth tailwinds.

The financials are going in the right direction. In the FY24 first-half result, revenue rose 76% to $103.1 million, the operating profit rose 97% to $12.4 million and the operating cash flow increased 105% to $12.3 million. The growth was particularly strong in that period thanks to the acquisition of ISP Tek Services.

The ASX share is beating growth expectations, leading management to upgrade the earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance to between $44 million and $46 million for FY24.

How cheap is it? According to the forecast on Commsec, it’s trading at an incredibly low 6x FY25’s estimated earnings. I’m looking to buy more Close The Loop shares when I have the capital to do so.

The post 2 great value ASX shares I want to buy appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Close The Loop. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Close The Loop. The Motley Fool Australia has recommended Close The Loop. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Rio Tinto Ltd (ASX: RIO) share price is in the red today.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining stock closed yesterday trading for $135.87. In morning trade on Tuesday, shares are changing hands for $134.96 apiece, down 0.7%.

For some context, the ASX 200 is down 0.2% at this same time.

The Rio Tinto share price is under selling pressure amid news that the company is pausing alumina shipments to third parties from its Queensland refineries.

Rio Tinto share price slips on alumina disruptions

Citing sources wishing to remain anonymous, The Australian Financial News reports that the ASX 200 miner has declared force majeure on its Queensland alumina shipments.

A force majeure, if you’re not familiar, relates to any force of nature (or man) that’s well beyond a company’s control. Like wild weather, war, or in Rio Tinto’s case, a shortage of gas to power its alumina refineries.

For its full-year results, reported in February, Rio Tinto noted:

Alumina production of 7.5 million tonnes was unchanged from 2022, with the Yarwun and Queensland Alumina Limited (QAL) refineries showing improved operational stability.

Alumina is the raw material that is processed into the aluminium we’re all more familiar with.

The anonymous sources said Rio Tinto’s refineries haven’t been able to produce at normal capacity due to regional gas shortages impacting the East Coast. Back in March, the miner reported fires in the state could have impacted the gas pipelines that supply Yarwun.

The miner’s own aluminium operations are not expected to be impacted.

The Rio Tinto share price remains up 25% over 12 months.

The post Rio Tinto share price sinks amid gas woes 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 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.