Category: Stock Market

Megaport Ltd (ASX: MP1) shares had a stunning session on Friday.

The release of a surprisingly strong third-quarter update sent short sellers scrambling to the exits and the network services company’s shares hurtling 41% higher to $5.63.

Can Megaport shares keep climbing?

The good news for readers is that Megaport shares could have plenty of room to climb higher from current levels despite Friday’s heroics.

According to a note out of Goldman Sachs, its analysts have responded to the update by reiterating their buy rating with a slightly trimmed price target of $8.10.

This price target suggests that Megaport’s shares could rise by a further 44% over the next 12 months. Not bad considering the gains it made last week!

Why is Goldman bullish?

The note reveals that Goldman was impressed with Megaport’s performance during the quarter. Particularly given its poor performance in the second quarter and the sudden departures of its CEO and CFO. The broker believes this bodes well for the future and suspects that the company will have sufficient capital to reach its free cash flow goals. It commented:

Following significant share price weakness around 2Q23 earnings and CEO/CFO departures, the positive 3Q23 result (financial + operating metrics) and introduction of stronger than expected FY23/24 EBITDA guidance improves our confidence in the outlook both in the short term (pricing impact & cost out execution) and medium term (MVE/MCR returning to strong growth), while reinforcing our view that MP1 will not need to raise capital to reach a sustainable FCF position.

Looking ahead, Goldman is looking for the company to build on this performance in the coming quarters. If it does, it expects it to help improve investor confidence. It adds:

Looking forward, MP1 now needs to deliver a number of consistent quarters of improved momentum, and show that its direct sales investment can accelerate growth from 2Q24 to continue rebuilding investor confidence. We remain positive that this can occur, given we believe in the structural growth drivers underpinning in MP1’s growth outlook (cloud/multi-cloud/NaaS adoption) so retain our Buy rating, while raising FY24/25 EBITDA +7% to +4% given marginally lower revenues, offset by the greater cost out targets. Our 12m TP declines -1% to A$8.10, implying +44% upside.

The post Megaport shares can rise another 40%: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• These were the best-performing ASX 200 shares in April
• Here are the top 10 ASX 200 shares today
• Why Appen, Megaport, Mirvac, and Pilbara Minerals shares are pushing higher today
• Megaport share price launches 40% higher amid rosy guidance
• These are the 10 most shorted ASX shares this 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 positions in and has recommended Megaport. The Motley Fool Australia has recommended Megaport. 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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I’m about to tell you about some excellent All Ordinaries (ASX: XAO), or All Ords, ASX shares that I think are very cheap.

Certainly, there’s been plenty of volatility in recent times, but this gives us an opportunity to buy shares at a (hopefully temporarily) cheaper price.

Lots of investors, analysts, and fund managers follow the largest businesses on the ASX. But I think it’s more likely to find an opportunity at the relatively unknown end of the market that could be priced at a better level.

With that in mind, these are two ASX All Ords shares that look particularly good to me.

Aeris Resources Ltd (ASX: AIS)

This is a very promising copper miner, in my opinion. The business is already producing copper and has more projects on the way. These could unlock a lot of extra earnings and cash flow in the future.

It has a market capitalisation of around $360 million, according to the ASX. At the end of the third quarter of FY23, it had $56 million of cash and receivables, around $25 million of stockpiled ore, and no debt. The balance sheet is in good shape.

In FY23, the ASX All Ords share is expecting to generate between $50 million to $70 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

Aside from my belief that the copper price can improve over the long term because of higher demand due to decarbonisation, it’s the low valuation that makes me believe this is extremely cheap.

Commsec numbers suggest that the business could generate 17 cents of earnings per share (EPS) in FY25, which would put it at less than three times FY25’s estimated earnings. Even if it only generated 12 cents of EPS in FY25, that would put the price/earnings (p/e) ratio at less than four.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara says that it makes software to help save families from cancer. The company’s software helps healthcare providers better understand a patient’s cancer risk and empowers patients in personal care decisions. It also guides recommendations about additional imaging, genetic testing, and other interventions.

Its software is used in more than 2,000 facilities, by more than 5,000 technologists, helping conduct more than three million cancer risk assessments each year.

The All Ords ASX share is delivering a lot of impressive numbers. In its fourth quarter of FY23, which it just announced, it achieved record cash receipts from customers of more than NZ$10 million. This was up 19% in constant foreign exchange rate terms year over year. Certainly, that growth rate is enabling the business to compound at a good rate.

Its quarterly update also showed the second straight positive net operating cash flow quarter. It’s not making a lot of cash flow yet, but being cash flow positive for a fast-growing business is a handy step.

If Volpara can sell more of its software to existing clients, win over new clients, and keep growing its scale, I think its gross margin profit of over 90% will enable the business to become very profitable in the future.

The post Why I think these ASX All Ords shares are extremely cheap right now appeared first on The Motley Fool Australia.

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More reading

• Why Aeris, Brainchip, Pointsbet, and Syrah shares are falling today
• Why I think it’s a great time to start buying ASX growth shares
• Brokers say these small cap ASX shares are buys with huge upside potential
• Why Aeris Resources, Evolution, Li-S Energy, and Race Oncology shares are charging higher
• 4 ASX All Ords shares smashing the market on big news

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 positions in and has recommended Volpara Health Technologies. The Motley Fool Australia has positions in and has recommended Volpara Health Technologies. 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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If you hold shares in an ASX lithium producer (or many), you might have had a glance behind-the-scenes at your company last week.

Many of the market’s favourite battery-material producers dropped quarterly reports in recent sessions, and there appears to be a common theme among many – lower lithium prices.

That’s likely not news to readers. Lithium prices have been falling for a while now – since late last year in fact.

Interestingly, many ASX lithium companies reporting last week were adamant the value of the battery-making material will recover lost ground, and then some.

So, could the sector face short-term pain and long-term gains? Let’s take a look.

What’s been weighing on lithium prices?

Simple supply and demand has been dragging lithium prices lower in recent months.

China has seen demand for electric vehicles (EV) slump amid the removal of subsidies, while Chinese car dealerships have been cutting prices of traditional cars ahead of the introduction of emissions standards. Meanwhile, previous inventory stocking means some would-be buyers probably aren’t topping up their lithium stocks.

It’s an observation noted by both Liontown Resources Ltd (ASX: LTR) and Pilbara Minerals Ltd (ASX: PLS) last week.

Liontown told investors Chinese spot prices for lithium hydroxide fell by more than 30% over the three months to March. International spot markets, on the other hand, dropped around 25%.

Pilbara Minerals saw its realised spodumene concentrate sales price fall 15% last quarter to around US$4,840 a tonne. Mineral Resources Ltd (ASX: MIN) also saw its average realised lithium battery chemicals revenue dump 14% to US$56,996 a tonne, exclusive of China VAT.

But not all ASX lithium shares have been so impacted, as evidenced by IGO Ltd (ASX: IGO). It said in its quarterly release:

The lithium market is currently experiencing a high level of volatility, which has resulted in the emergence of a price disparity between lithium product streams.

Are ASX lithium shares playing a long-term pricing game?

Well, yes and no. Pilbara Minerals, for one, expects lithium prices to continue softening this quarter. Though, CEO and managing director Dale Henderson said a potential resurgence is still on the cards for the second half of 2023, continuing:

We remain very positive on the structural deficit for lithium.

He believes recent investments by global giants in the lithium and battery space, as well as the long-term trend of EV adoption, are evidence of such a deficit.

Meanwhile, Liontown commented in last week’s update:

The medium to long term outlook remains very attractive with structural supply deficits and ongoing robust demand for electric vehicles and battery storage devices.

But not all are so bullish. Barrenjoey head of mining research Glyn Lawcock said potential prices could “moderate at the top end of the cost curve in 2023 and 2024” amid a supply glut, the Australian Financial Review reported last month

The broker is said to have slashed its 2023 spodumene price forecast to US$3,966 a tonne – a 43% cut. Meanwhile, its 2024 forecast was dropped 50% to US$2,500 a tonne.

Looking forward, however, it expects the market to be back in deficit from 2027.

The post ASX lithium shares: Short-term pain for long-term gain? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Here’s what brokers are saying about Pilbara Minerals shares
• Top brokers name 3 ASX shares to buy next week
• 2 ASX lithium shares this US institutional investor is buying up big (and one it’s selling)
• Here are the top 10 ASX 200 shares today

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 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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ASX dividend shares might be all the rage, but just buying stocks for high yields is a recipe for trouble.

That’s because a point-in-time yield percentage reveals nothing about the future prospects of the business.

It’s no use harvesting a 15% dividend if the share price halves!

That’s why professional investors always emphasise the importance of achieving a harmonious balance of dividend yield and capital growth potential.

Here are two such examples from the S&P/ASX 200 Index (ASX: XJO):

‘An attractive valuation’ with 5 major tailwinds

According to the team at Auscap Asset Management, NIB Holdings Limited (ASX: NHF) currently has “an attractive valuation”.

“We believe that NIB is a high-quality defensive business led by a highly capable management team with exposure to multiple attractive end markets,” it stated in a memo to clients.

“Trading on a reasonable valuation, with good forecast earnings per share growth over the coming years, we are enthusiastic about the future prospects for the company.”

The way Auscap analysts see it, the private health insurer has exposure to five rising themes.

“There are parts of the economy which should grow even faster than average, including healthcare expenditure, immigration, international student demand, inbound tourism, and services related to the National Disability Insurance Scheme (NDIS).”

Companies that are riding on these trends “often trade on very high valuations”. 

But not NIB.

“NIB is trading on a 17.5x forward price-to-earnings ratio, towards the bottom end of its historical range since the 2014 Medibank Private Ltd (ASX: MPL) IPO.”

The NIB share price has risen 10.5% over the past 12 months, leaving it with a dividend yield of 3.1%.

‘A sensible approach to growth and risk’

For Airlie senior investment analyst Joe Wright, general insurer QBE Insurance Group Ltd (ASX: QBE) is in a sweet spot of its business cycle.

“Several years of above-trend catastrophe events (CATs), as well as COVID-related business interruption claims and the return of broad-based inflation, has seen the commercial insurance market tighten considerably,” Wright said on the Airlie blog.

“The net [effect] has been a prolonged period of premium rate growth not seen since the early 2000s.”

Insurance is the rare industry that’s whistling all the way to the bank at the moment. 

Ten consecutive months of interest rate rises is providing excellent returns on its investments, and inflation is merely giving it an excuse to exercise its pricing power.

“We continue to believe QBE is underearning as margins for both the North American business unit, and more recently the Lloyd’s syndicates, have dragged on group performance,” said Wright.

“To date, [chief executive] Andrew Horton has demonstrated a sensible approach to growth and risk management, and for all of these reasons, QBE still looks attractive to us at ~9.5x P/E.”

QBE shares have rocketed 24.3% over the past 12 months while providing a dividend yield of 2.54%.

The post Perfect balance: 2 ASX 200 shares set to surge while paying dividends appeared first on The Motley Fool Australia.

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More reading

• This ASX 200 stock is ‘one of the cheapest defensives’ to buy right now
• 2 ASX 200 dividend shares to buy now: brokers
• Leading brokers name 3 ASX shares to buy today
• ‘Resilient earnings’: Buy 3 ASX 200 shares to win through troubled times
• 5 things to watch on the ASX 200 on Friday

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 recommended NIB Holdings. 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 Telstra Group Ltd (ASX: TLS) share price was on form in April.

Not only did it record a decent 3.6% gain for the month, which doubled the market return, the telco giant’s shares cracked a number of new multi-year highs in the process.

This means that the Telstra share price is now up almost 11% year to date, much to the delight of its shareholders.

Why did the Telstra share price scale new heights last month?

There were a few factors giving the Telstra share price a lift last month.

One was increased volatility and concerns over a global recession, which fuelled demand for defensive shares. Given how telecommunication shares are seen as some of the more defensive options out there, nervous investors were quick to snap up Telstra’s shares.

In addition, news that Telstra had increased its mobile prices also went down well with investors and brokers.

In respect to the latter, last month Macquarie retained its outperform rating on the telco giant’s shares with an improved price target of $4.68.

It was pleased with the mobile price increases and sees this industry rationality as a big positive for Telstra. So much so, it suspects that the company could be on course to deliver stronger than expected earnings in the coming years.

Over at Goldman Sachs, its analysts were equally positive. They responded to the increases by reiterating their buy rating with an improved price target of $4.70.

The broker also doesn’t expect the increases to stop there. It added:

Following recent (and significant) mobile prices changes from Telstra (Prepaid, JB-HiFi), we now believe they are more likely to fully utilize CPI (GSe +7% in Mar-23) at the upcoming postpaid mobile price review – raising plan pricing by c.$4-6/m. This is ahead of our prior forecast for a c.$2-3/m, so drives our FY24-25E EBITDA +1.6%/+1.1% and EPS +4%/+2% (higher pricing, partly offset by lower postpaid sub growth).

Like Macquarie, Goldman believes the market is underestimating Telstra’s earnings growth. It said:

Ultimately, we continue to believe consensus mobile forecasts look conservative, and now sit +3% ahead of FY24 postpaid ARPUs. We expect updated mobile pricing expected to be announced in coming weeks (to give sufficient notice to the Jul-23 introduction), which should be positively received.

Based on the above, it wouldn’t be overly surprising to see the Telstra share price building on April’s heroics and hitting new multi-year highs this month.

The post Why did the Telstra share price crack new multi-year highs in April? appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in May 2023
• 6 excellent ASX 200 dividend shares that aren’t banks or miners
• Bought Telstra shares last June? Guess what kind of dividend yield you’re earning today
• Brokers name 3 ASX shares to buy now
• 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 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.

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The S&P/ASX 200 Index (ASX: XJO) is, for better or for worse, dominated by the big banks and giant mining companies.

In fact, according to the creator of the ASX 200, the finance (27.1%) and materials (25.6%) sectors combined take up the majority index weight.

This means that the Australian market is skewed towards dividend stocks.

The trouble with ASX dividend shares is that, generally, they don’t have as much potential for capital growth as other equities.

The logic is that, if the business was expanding at a rapid rate, management would not be giving excess cash back to investors. The company would, instead, put the money back into the business to fuel growth.

Following in the footsteps of giants

Betashares manager Libby Hopper recently said that, while they may not attract as much attention as the banks and miners, there are actually plenty of ASX 200 growth shares to choose from.

They come from varied fields, such as healthcare, retail and technology.

“Australia boasts a number of under the radar success[es]… including Pro Medicus Limited (ASX: PME), Lovisa Holdings Ltd (ASX: LOV) and Altium Limited (ASX: ALU),” Hopper said on the Betashares blog.

She reckons Pro Medicus is following in the footsteps of CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) as “an Australian healthcare success story”.

“In its 2022 annual report, Pro Medicus’ after tax profits and revenue jumped more than 44% and 37% respectively compared to the previous period,” said Hopper.

“Looking ahead, the company expects adoption of its technologies to increase – particularly as the use of artificial intelligence in the industry accelerates.”

International expansion and technology themes

The Lovisa share price has more than doubled since June last year, which is incredible enough, but even more so considering the market has remained depressed in that time.

It seems like another lifetime ago when the jewellery retailer was forced to shut stores due to the COVID-19 pandemic.

“Since then the business has seen year on year revenue growth – increasing almost 60% in 2022 to more than $458 million,” said Hopper.

“Lovisa’s success to date has left it with a healthy balance sheet which it is using to continue its international expansion and better its digital platforms.”

Altium, as a maker of software for designing printed circuit boards, cashes in on from multiple global themes in technology.

“Altium stands to benefit from increased advancements in and adoption of key technologies such as robotics, artificial intelligence as well as electric and autonomous vehicles,” said Hopper.

“Altium has subsequently reaffirmed its guidance for the 2023 financial year, with total revenue anticipated to rise between 15% to 20% to approximately US$255 to 265 million.”

The post ‘Under the radar success’: 3 quality ASX 200 growth shares to buy right now appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in May 2023
• This is how you can generate passive income in May with ASX shares
• Nasdaq rebound! Brokers say these ASX 200 tech shares are buys
• Why did the CSL share price smash the ASX 200 in April?
• Don’t get duped: Why cheap ASX shares can still rip you off

Motley Fool contributor Tony Yoo has positions in CSL and Cochlear. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, CSL, Cochlear, Lovisa, and Pro Medicus. The Motley Fool Australia has positions in and has recommended Pro Medicus. The Motley Fool Australia has recommended Cochlear and Lovisa. 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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Are you looking to bolster your income portfolio with some new dividend stocks this month?

If you are, you may want to look at the two listed below that have been forecast to provide attractive yields. Here’s what you need to know about these buy-rated ASX 200 dividend stocks:

National Australia Bank Ltd (ASX: NAB)

The first ASX 200 dividend stock that has been named as a buy is big four bank, NAB.

Goldman Sachs is positive on the bank in the current environment. This is due to NAB’s exposure to commercial lending and its belief that “volume momentum over the next 12 months as favouring commercial volumes over housing volumes.”

In respect to dividends, the broker is expecting this to underpin fully franked dividends of $1.68 per share in FY 2023 and FY 2024. Based on the current NAB share price of $28.84, this implies yields of 5.8% in both years.

Goldman Sachs has a buy rating and $33.06 price target on its shares.

Stockland Corporation Ltd (ASX: SGP)

Another ASX 200 dividend stock that could be a buy is Stockland. It is a residential and land lease developer and retail, logistics, and office real estate property manager.

Citi is a fan of the company and recently named it as its top pick in the sector. The broker believes the market is being too negative on Stockland and doesn’t expect property prices to fall as much as feared.

Its analysts are also forecasting some big dividend yields in the near term. Citi expects dividends per share of 27 cents in FY 2023 and FY 2024. Based on the current Stockland share price of $4.45, this will mean sizeable yields of 6.1% in both financial years.

The broker currently has a buy rating and $4.70 price target on its shares.

The post Analysts say these ASX 200 dividend stocks are top buys appeared first on The Motley Fool Australia.

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More reading

• Should I buy NAB shares ahead of next week’s half-year results?
• Which is the best ASX 200 bank share to buy right now?
• Here are the top 10 ASX 200 shares today
• First Republic Bank shares just crashed 50%. Here’s how ASX 200 bank stocks are responding
• Lowest ASX bank yield: Are CBA shares still worth it?

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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Watch out for a possible shock to your portfolio of ASX shares on Tuesday afternoon.

According to a survey conducted by comparison site Finder, 55% of economists are tipping the Reserve Bank of Australia to increase its cash rate again after giving Australians a rest over Easter.

That’s despite the latest annual inflation rate cooling to 7%, down from 7.8% for the 2022 calendar year.

Impact Economics and Policy economist Dr Angela Jackson is one expert that reckons that’s not enough relief, so the Reserve Bank will be forced to act at 2:30pm Tuesday.

“The latest inflation figures will provide enough justification for the RBA board to move again on rates, with services inflation in particular likely to weigh heavily on their decision.”

The S&P/ASX 200 Index (ASX: XJO) has risen 5% since the start of the year, but a resumption of interest rate hikes could deal it a blow, as it will further dent already-low consumer and business confidence.

In fact, multiple experts last week predicted share markets could cop a 10% correction in the coming weeks as collateral damage from the ongoing fight against inflation.

Interest rates could be CUT later this year

However, that does mean a significant 45% of the surveyed economists think rates will stay the same this week.

Finder head of consumer research Graham Cooke admitted that’s the most divided sample in 12 months.

“This month’s result is the tightest we’ve seen since the RBA started hiking the cash rate, highlighting the difficulty of managing inflationary pressures without breaking too many household budgets.”

The economists at AMP Ltd (ASX: AMP) are in the optimistic camp.

“Inflation has now peaked and is falling a bit faster than the RBA expected,” said AMP chief economist Dr Shane Oliver.

“Although it’s a close call, this bolsters the case – along with increasing evidence of slowing growth and a cooling labour market – for the RBA to leave rates on hold in May.”

In encouraging words for long-term investors willing to hold onto their portfolios, his colleague Diana Mousina predicted inflation would “surprise to the downside” as 2023 unfolds.

“Given the slowing in goods inflation, signs of a weakening in job openings and employment demand and high recession/downturn risks, services inflation should weaken this year,” Mousina said on the AMP blog.

“We anticipate that inflation will be lower than most are expecting by the end of the year.”

Indeed, a whopping 76% of economists on the Finder survey are tipping that the Reserve Bank will leave rates alone in June.

Stock markets could even be provided with a nice boost later, according to Oliver, with “an eventual cut in rates to support struggling economic growth from later this year and through 2024”.

The post Why ASX shares could be rocked on Tuesday appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Top ASX shares to buy in May 2023
• Here’s what brokers are saying about Pilbara Minerals shares
• These ASX dividend shares have big yields
• Top brokers name 3 ASX shares to buy next week

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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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week on a positive note. The benchmark index rose 0.2% to 7,309.2 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to rise again

The Australian share market looks set to rise on Monday thanks to a strong finish to last week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 54 points or 0.75% higher this morning. In the United States, the Dow Jones rose 0.8%, the S&P 500 climbed 0.8%, and the NASDAQ pushed 0.7% higher.

Oil prices jump

It could be a strong start to the week for ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices jumped on Friday. According to Bloomberg, the WTI crude oil price was up 2.7% to US$76.78 a barrel and the Brent crude oil price rose 2.7% to US$80.33 a barrel. Oil prices rose after U.S. data showed crude output was declining while fuel demand was growing.

Pilbara Minerals named as a buy

The Pilbara Minerals Ltd (ASX: PLS) share price could be good value according to analysts at Citi. That’s despite its quarterly update being softer than it had hoped. This is because the broker believes that we are probably at the end of the downstream destocking cycle. Citi has retained its buy rating and $4.60 price target on the lithium giant’s shares.

Gold price relatively flat

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a subdued start to the week after the gold price traded broadly flat on Friday night. According to CNBC, the spot gold price edged a fraction higher to $1,999.4 per ounce. Improving risk sentiment appears to have weighed on the safe haven asset.

Coles rated as a sell

Coles Group Ltd (ASX: COL) shares could be overvalued according to analysts at Goldman Sachs. In response to the supermarket giant’s quarterly update, the broker has retained its sell rating and $15.80 price target. The broker said: “COL is trading at 12mth fwd P/E of 24x vs TP implied ~21x. Our 24/25e NPAT remains 9%/8% below consensus, largely due to lower margins.”

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in May 2023
• Here’s what brokers are saying about Pilbara Minerals shares
• Top brokers name 3 ASX shares to buy next week
• Want $300 in monthly passive income? Buy 24,300 shares of this ASX 200 stock
• These were the best-performing ASX 200 shares in April

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 positions in and has recommended Coles 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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As we rocket faster than a speeding bullet to the halfway mark of 2023, we asked our Foolish writers which ASX shares they reckon could be set to soar up, up and away!

Here is what the team came up with:

7 best ASX shares for May 2023 (smallest to largest)

• Universal Store Holdings Ltd (ASX: UNI), $360.59 million
• Beach Energy Ltd (ASX: BPT), $3.35 billion
• Altium Limited (ASX: ALU), $5.02 billion
• Allkem Ltd (ASX: AKE), $7.81 billion
• Treasury Wine Estates Ltd (ASX: TWE), $10.06 billion
• James Hardie Industries Plc (ASX: JHX), $14.80 billion
• Telstra Group Ltd (ASX: TLS), $50.49 billion

(Market capitalisations as of market close 28 April 2023).

Why our Foolish writers love these ASX stocks

Universal Store Holdings Ltd

What it does: Universal Store is a retailer focused on premium youth apparel. It operates three different brands – Universal Store, Thrills and Perfect Stranger.

By Tristan Harrison: I think this ASX All Ords share could deliver good returns over the next few years.

In its FY23 half-year result, the company delivered statutory profit growth of 31.7% and declared an interim dividend of 14 cents per share.

Using the forecast numbers on Commsec, Universal Store shares are valued at just 11x FY23’s estimated earnings with a potential grossed-up dividend yield of 8.1%.

I believe the business can continue to grow as it opens more stores, expands the Perfect Stranger brand nationally, benefits from increased scale and achieves greater efficiencies through its new distribution centre.

Motley Fool contributor Tristan Harrison does not own shares in Universal Store Holdings Ltd.

Beach Energy Ltd

What it does: Beach Energy is an oil and gas producer based in South Australia. The company has numerous onshore and offshore projects in New Zealand and Australia. It’s a key gas supplier to Australia’s east coast markets.

By Bernd Struben: Beach Energy shares are down 6% in 2023, which I think presents a good entry point.

Oil and gas prices have come off the boil, but I believe energy prices will rebound once global interest rates peak and recession fears ebb.

While Beach reported a 5% decline in third-quarter production, that was mostly due to expected and unexpected outages, and the company did maintain its guidance.

Looking ahead, Beach has significant potential to increase production, with first gas from its Waitsia Gas Plant targeted by the end of 2023.

The company’s balance sheet is strong, with total liquidity of $504 million as at 31 March.

Beach pays a trailing dividend yield of 2.0%, fully franked.

Motley Fool contributor Bernd Struben does not own shares in Beach Energy Ltd.

Altium Limited

What it does: Founded in 1985, Altium provides software for designing printed circuit boards (PCBs). Think of the company as the digital toolkit for designing the technology responsible for powering modern-day devices – from electric vehicles to smart vacuum cleaners.

By Mitchell Lawler: Despite Altium making strides in growing the business over the past few years, the share price is still fluctuating between $25 and $40. This is probably due to the lack of earnings growth over this period. However, I believe this could be set to change. 

Earnings margins ultimately come down to pricing power. In the PCB design space, there are two big names: Altium and Cadence. Both companies are growing their revenue aggressively and maintaining profit margins above 20%. 

This leads me to think there could be a duopoly forming in the industry, which would allow both companies to lift their prices. Mastercard and Visa are prime examples of this, now touting margins greater than 40%.

Motley Fool contributor Mitchell Lawler does not own shares in Altium Limited.

Allkem Ltd

What it does: Allkem is the lithium mining giant formed by the merger of Galaxy Resources and Orocobre in 2021.

By James Mickleboro: Although lithium prices have taken a tumble in recent months and look likely to keep falling for some time, I’m still positive on Allkem shares. This is due to the company’s production growth plans for its massive projects across the Americas and Australia.

Management aims to grow Allkem’s lithium carbonate equivalent (LCE) production by >4x over the five years to FY 2028. I expect this production growth to help offset lithium price declines and keep the company’s profits strong for the foreseeable future.

Another reason I would buy Allkem stock is its valuation. At 0.9x net asset value (NAV), the ASX 200 share looks meaningfully cheaper than rivals, which trade on a peer average of ~1.3x NAV. It is partly for this reason that Goldman Sachs currently has a buy rating and a $12.90 price target on Allkem shares.

Motley Fool contributor James Mickleboro owns shares of Allkem Ltd.

Treasury Wine Estates Ltd

What it does: Treasury Wine is the company behind iconic Australian wine labels such as Penfolds, Wolf Blass, and 19 Crimes.

By Brooke Cooper: The Treasury Wine share price has been on a roll lately.

It’s lifted more than 50% from the lows it reached in 2021 amid wine tariffs imposed by China in response to political tensions. And I think it has scope to continue gaining.

Treasury Wine reported a 17% jump in earnings before interest, tax, SGARA, and material items for the first half of the financial year.  Not to mention, there looked to be positive news on the tariff front last month.

I’m not alone in my bullishness. Goldman Sachs has a buy rating and a $14.70 price target on Treasury Wine shares.

Motley Fool contributor Brooke Cooper does not own shares in Treasury Wine Estates Ltd.

James Hardie Industries Plc

What it does: James Hardie is the world’s leading producer and marketer of fibre-cement wall and floor products used in new residential, commercial, and industrial construction.

By Bronwyn Allen: James Hardie shares steadily tumbled throughout 2022.

This was due to rising inflation and interest rates, as well as global supply disruptions and labour shortages that created significant delays in housing construction activity.

But, it appears all that could be now turning around, providing tailwinds for an ASX 200 share that many experts believe has been oversold.

Brokers have been recommending James Hardie as a buy since the start of 2023, and its share price is now up by almost 30% in the year to date.

It may not be too late to buy, though. Citi says the company is trading on an attractive FY24 “trough earnings” multiple of 19, and the stock price is still a long way off its historical peak of $58.07, reached in December 2021.

Motley Fool contributor Bronwyn Allen owns shares in James Hardie Industries Plc.

Telstra Group Ltd

What it does: Telstra is a company almost all Australians would be familiar with. It is the largest and most dominant telco in Australia, offering a range of mobile and fixed-line internet and telephony services.

By Sebastian Bowen: I believe Telstra is an ASX 200 share worth a second look in May. This telco has been on a bit of a tear this year, rising from under $4 a share at the start of the year to the $4.30 range we are seeing more recently. Telstra also hit several new 52-week highs at the end of April too.

I like Telstra because of its inelastic customer demand and strong brand. This is a blue-chip stock that should do well in all economic climates.

Many brokers think Telstra stock has further to run as well. Last month, Morgans had Telstra on its best buys list, with a share price target of $4.70.

Motley Fool contributor Sebastian Bowen owns shares in Telstra Group Ltd.

The post Top ASX shares to buy in May 2023 appeared first on The Motley Fool Australia.

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More reading

• 6 excellent ASX 200 dividend shares that aren’t banks or miners
• These are the ASX 200 lithium shares to buy due to a new ‘game changing’ technology
• Bought Telstra shares last June? Guess what kind of dividend yield you’re earning today
• Here are the top 10 ASX 200 shares today
• Nasdaq rebound! Brokers say these ASX 200 tech shares are buys

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Cadence Design Systems, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Mastercard and Treasury Wine Estates. 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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