Category: Stock Market

Woodside Energy Group Ltd (ASX: WDS) shares could be destined to provide investors with a big dividend yields in the near term.

In fact, if consensus estimates are to be believed, the energy producer will deliver earnings strong enough to offer some of the biggest dividend yields on the ASX 200 index in 2023 and 2024.

Woodside shares tipped to pay big dividends

The analyst consensus estimate is for Woodside to reward its shareholders with fully franked dividends of $3.13 per share in FY 2023 and then $2.68 per share in FY 2024.

Based on where Woodside shares are currently trading, this will mean yields of 8.5% and 7.3%, respectively.

This means that a $20,000 investment would yield dividends worth approximately $1,700 and $1,460 across those two years.

Even bigger dividends forecast by Citi

Consensus estimates are the average of predictions from a large number of brokers. This means that some analysts have lower than consensus estimates and some have higher than consensus estimates.

One broker that believes Woodside will pay even larger dividends in both years is Citi.

Its analysts are currently forecasting fully franked dividends of $3.47 per share in FY 2023 and $3.38 per share in FY 2024.

This would mean very generous yields of 9.5% and 9.2%, respectively, over the next couple of years.

It is because of these potential payouts that the broker is recommending Woodside shares as a buy with a $38.50 price target. Last month, the broker commented:

Today WDS held its annual investor day having earlier this week provided production & capex guidance for CY23. WDS provided a prodn profile to 2027 for sanctioned projects as well as estimates for capex, operating cash flow and free cash flow on the same basis using forward curves for gas/oil. We’ve downgraded CY23/24 EPS by 23%/12% given latest guidance. We stay Buy rated given ongoing high dividend potential.

The post Can Woodside shares deliver 9% yields for ASX income investors in 2023 and 2024? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Burning hot: The outlook for ASX 200 energy shares in 2023
• 5 things to watch on the ASX 200 on Friday
• Power up: 3 best ASX 200 energy shares of 2022
• Can Woodside shares keep delivering stellar gains in 2023?

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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Small-cap ASX shares have really been on the nose in the past year as valuations have plummeted in the face of raging inflation and the fear of an economic slowdown.

And with much of the world facing financial troubles in 2023, many experts are still advising investors to stay away in favour of defensive value stocks.

But Forager Funds chief investment officer Steve Johnson, in a report to clients, reckoned that small caps could see a massive turnaround this year.

“That might seem counterintuitive. Everyone is telling you to buy defensive, resilient businesses, right?

“Well, in and of itself, what everyone is telling you is often a good contrarian indicator. But global small-cap fund manager Global Alpha recently released research suggesting there is more to my question than a simple contrarian viewpoint.”

‘Undemanding valuations’ combined with recession resilience

For Johnson, three positives make small-cap ASX shares a tempting choice at the moment.

Firstly, small-cap stocks are starting 2023 from a very low base.

“The S&P/ASX Small Ordinaries (ASX: XSO) was down 21% for 2022, versus an All Ordinaries (ASX: XAO) that was down just 7%. For non-mining companies, the performance was even worse,” said Johnson.

“That leaves us with some undemanding valuations. And starting prices matter more than anything else.”

Secondly, Johnson argues against the stereotype that large companies are better placed to withstand economic downturns.

“Small companies tend to perform better in a recession than most investors anticipate,” he said.

“They can be nimble and agile and are often run by a founder or significant shareholder who has a strong incentive to make tough decisions early.”

Thirdly, acquisitions are “far more attractively priced” in periods of economic slowdowns, and smaller companies are much more likely to be involved.

“That is both for companies that are doing the acquiring and those that get bought,” said Johnson.

“Our Forager Australian Shares Fund received takeover offers for five different companies in the second half of 2022, out of a portfolio of just 30 stocks.”

It’s this combination of low expectations built into the share prices and businesses performing through recessions that make small caps compelling at the moment.

And historically, judging from the Global Alpha research, small caps have outperformed large caps for years after the economic troubles have passed.

“In the US, small caps were the best-performing asset class for the five years post the 1973/4 market meltdown, through a recession and a decade of high inflation,” said Johnson.

“My grandmother always tells me the secret to happiness is low expectations, though. The good news is that expectations are a lot lower today than they were just 12 months ago.”

The post 3 reasons why small-cap ASX shares could rocket in 2023 appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Burning hot: The outlook for ASX 200 energy shares in 2023
• 3 reasons to invest in the ASX 200 in 2023
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares 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 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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Stock experts, especially at this time of the year, love to give their opinions on where the share market is headed.

But IML portfolio manager Michael O’Neill reckons such comments are useless to long-term investors.

“Any experienced investor will tell you that it’s incredibly difficult to time the market,” O’Neill said on the IML blog.

“What you’re better off doing is looking at long-term fundamentals and trends and making decisions on where you’re likely to get the best return in the medium to long term.”

Capital growth will be anaemic in the coming years

For the IML team, long-term drivers point to investing in dividend shares at the moment.

O’Neill reckons we simply won’t see the same amount of capital growth over the next decade as we enjoyed in the previous 10 years.

“Ultra-low interest rates and readily available, cheap money drove a very long bull market. With high inflation and rising rates, that time has passed,” he said.

“While markets may or may not perform well in 2023, what is very unlikely is that we’ll enter another long bull market with a similar amount of capital growth.”

This means that dividends will make up a greater proportion of total investment returns for the rest of the 2020s.

“For us, with capital growth likely to be lower in the medium-long term, it’s the right time to place greater focus on income.”

O’Neill predicts volatility will remain pervasive in 2023.

“While this makes it a challenging market for investors, it does also offer opportunity,” he said.

“With company valuations fluctuating, it’s a stock pickers’ market, with a great chance to pick up high-quality companies at bargain prices.”

Reliable in turbulent times

O’Neill named two reasons why dividend shares are superior in uncertain times: reliable returns and safety net. 

He cited a historical breakdown of the S&P/ASX 300 (ASX: XKO), which showed a remarkable statistic.

“Over the last 20 years, dividends have returned 51% of overall returns,” said O’Neill.

“While this figure alone is evidence enough of dividends’ importance, it becomes more striking when you look at the volatility of these returns.”

Standard deviation of capital growth was 14 percentage points, while income was just 0.2.

“Return on capital fluctuates significantly, but dividend returns are remarkably reliable,” said O’Neill.

“While the level of capital returns from a share portfolio depends on movements in individual share prices, this is not the case for dividends. That’s because the level of dividends received by an investor is decided by the company’s board and is generally a reflection of the company’s overall profitability.”

As for dividend shares acting as a safety net, O’Neill pointed to the years when capital losses piled up.

“In the peak of the tech wreck in 2002, the ASX 300 provided a return on capital of -12%, but dividends returned 3%. In 2008, at the start of the GFC, capital dropped -42%, but dividends returned +3%,” he said.

“And while the share market recovery from COVID was very swift, the ASX 300 still dropped -1% but income? It returned a steady 3%.”

The post Why 2023 is the time to double down on ASX dividend shares: expert appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Tech rebound! Here are 2 ASX ETFs to buy before it’s too late
• Analysts say these ASX growth shares can generate huge returns for investors
• How I’d invest $5,000 in high-yield ASX shares to earn a second income
• 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 with a solid gain. The benchmark index rose 0.65% to 7,109.6 points.

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

ASX 200 expected to rise gain

The Australian share market looks set to continue its rise on Monday following a decent finish to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 35 points or 0.5% higher this morning. On Wall Street, the Dow Jones was up 0.3%, the S&P 500 rose 0.4%, and the NASDAQ climbed 0.7%. The latter had its best week since November.

Oil prices rise

It looks set to be a solid start to the week for ASX 200 energy shares Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) after a positive finish to the week for oil prices. According to Bloomberg, the WTI crude oil price was up 2.15% to US$80.07 a barrel and the Brent crude oil price rose 1.7% to US$85.43 a barrel. Oil prices rose on China hopes and US dollar weakness.

Tech shares on watch

It could be a good session for ASX 200 tech shares such as Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO) on Monday. This follows a solid session for their US counterparts on the NASDAQ index on Friday. Investors have been buying tech shares again amid signs that inflation is easing.

ASX 200 bank shares on watch

ASX 200 bank shares such as Commonwealth Bank of Australia (ASX: CBA) will be on watch on Monday. Investors will no doubt be hoping that a strong session for US based banks will rub off on the local sector today. On Wall Street, Bank of America climbed 2.2%, JP Morgan rose 2.5%, and Wells Fargo pushed 3.3% higher.

Gold price rises again

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could be heading higher today after the gold price rose again on Friday. According to CNBC, the spot gold price was up 1.3% to US$1,923 an ounce. The precious metal had a strong week thanks to optimism that the US Federal Reserve will slow its rate hikes.

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

• Analysts say these ASX growth shares can generate huge returns for investors
• Burning hot: The outlook for ASX 200 energy shares in 2023
• Buy these ASX 200 dividend shares when the market reopens: analysts
• 3 reasons to invest in the ASX 200 in 2023
• US inflation is cooling: I’d buy these 3 ASX shares right now

Motley Fool contributor James Mickleboro has positions in Altium and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium and Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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With inflation showing signs of easing globally, the outlook for the tech sector is improving by the day.

If you’re wanting to invest in the sector before it rebounds fully, then the exchange traded funds (ETFs) listed below could be worth considering.

Here’s why they could be great options right now:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ASX tech ETF for investors to consider is the BetaShares Global Cybersecurity ETF.

As you might have guessed from its name, this ETF gives investors exposure to the leading companies in the global cybersecurity sector.

And what a place to be right now! Last year there were countless cyber attacks reported in the media. Medibank, Optus, Rockstar, and Uber were just a few notable examples.

These attacks demonstrate how the internet is a bit like the Wild West for businesses (and consumers) right now and that going without adequate cybersecurity is a major risk.

In light of this, it wouldn’t be surprising if the already strong and growing demand for cybersecurity services went up a gear in 2023.

This bodes well for companies included in the fund such as Accenture, Cloudflare, Crowdstrike, Okta, and Palo Alto Networks.

VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)

Another tech ETF for investors to consider is the VanEck Vectors Video Gaming and eSports ETF.

This ETF gives investors exposure to many of the largest companies involved in video game development, eSports, and gaming related hardware and software.

VanEck notes that the increasing popularity of video games and eSports means that these companies are well-placed to benefit.

One of the companies in the fund is Roblox. It is the game developer behind the eponymous Roblox online metaverse platform and game creation system. At the last count, Roblox had 56.7 million daily active users and was generating significant revenue from them.

In addition, you’ll be buying a slice of game developers Activision Blizzard, Take-Two, and Electronic Arts, as well as graphics processing unit (GPU) developer Nvidia.

The post Tech rebound! Here are 2 ASX ETFs to buy before it’s too late appeared first on The Motley Fool Australia.

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More reading

• US inflation is cooling: I’d buy these 3 ASX shares right now
• These could be top ETFs for ASX investors to buy in January
• 3 excellent ETFs for ASX investors to buy in January
• 3 fantastic ETFs for ASX investors to buy for 2023

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 BetaShares Global Cybersecurity ETF. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended VanEck Vectors Video Gaming And eSports ETF. 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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Looking for a growth share or two to buy? If you are, you may want to look at the two listed below.

Here’s why these ASX growth shares are rated highly right now:

Corporate Travel Management Ltd (ASX: CTD)

Although a number of ASX travel shares have recently hit 52-week highs, the same cannot be said for Corporate Travel Management, which is languishing 37% lower than its highs.

The team at Morgans appears to see this as a buying opportunity for investors, especially given how they believe the company will come out of the pandemic in a stronger position. It explained:

CTD is our key pick of the travel sector. For investors that can take a medium-term view, we see substantial upside in its share price as the company recovers from the COVID-affected travel downturn. In fact, CTD should be a materially larger business post COVID given it has made two highly accretive acquisitions during the downturn. The company has also won a lot of new business, implemented structural cost-out opportunities and continued to develop its market-leading technology offering which means it will require less staff in the future. CTD is well managed and has a strong balance sheet (no debt).

Morgans has an add rating and $25.65 price target on the company’s shares. This implies 53% upside from the latest Corporate Travel Management share price of $16.66.

Xero Limited (ASX: XRO)

This cloud accounting platform provider could be another ASX growth to buy.

That’s the view of analysts at Goldman Sachs, which believe Xero has a “compelling global growth story.”

Particularly given how it currently provides its core accounting solution to a total of 3.3 million global subscribers, which is well short of its total addressable market (TAM) of ~45 million+ subscribers. Goldman commented:

We see Xero as very well placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$76bn TAM. Following the recent underperformance (absolute/relative), we see an attractive entry point into a compelling global growth story and our preferred large-cap technology name in ANZ, and are Buy rated.

Goldman Sachs has a buy rating on Xero’s shares with a $115.00 price target. Based on the latest Xero share price of $71.07, this implies potential upside of 62% for investors.

The post Analysts say these ASX growth shares can generate huge returns for investors appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why did the Xero share price take such a beating on Wednesday?
• Why European Lithium, PEXA, PolyNovo, and Xero shares are dropping today
• ‘Attractively priced’: Why fund is excited by these 2 ASX 200 shares
• Could ASX 200 travel shares be set for a major boost in 2023?

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Corporate Travel Management. 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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So you want to invest $5,000 into ASX shares to produce a second income? Great idea. Passive income is something that I’m sure all of us would love more of.

What could be better than getting paid without needing to work? ASX dividend shares are a great way of gaining a secondary income source.

The dividends that income shares pay out are a true form of passive income. And unlike property, you can start receiving income from investing as little as $500.

So if you wanted to invest $5,000 into high-yield ASX shares, where is a suitable one to start?

Well, there are more than a few options you can choose from.

Where not to look for income in 2023

But let’s start with a couple of tips regarding areas to avoid. Firstly, don’t get trapped into a dividend share just because it has a high yield. For example, Magellan Financial Group Ltd (ASX: MFG) currently has a trailing dividend yield of 19.19% right now.

But Magellan has been bleeding customers for more than a year now, and few investors would expect the company to be able to maintain its 2022 dividends this year. That’s probably why the company has lost 40% of its value since last August. It could well be a classic ‘dividend trap’.

I would also avoid investment funds that charge high fees. Listed Investment Company (LIC) WAM Capital Ltd (ASX: WAM) currently has a trailing dividend yield of 9.63% on the table right now.

But this LIC charges an annual management fee of 1.25% whilst woefully underperforming far cheaper index funds over the past five years on a total returns basis.

How to invest $5,000 for high-yield ASX dividend shares

Instead, I would look to something like the Vanguard Australian Shares Index ETF (ASX: VAS). Right off the bat, this exchange-traded fund (ETF) charges a far more reasonable 0.1% per annum to its investors.

But this ETF holds 300 of the largest ASX shares in its portfolio. That gives investors massive diversification in one easy share. Most of the shares that this ETF holds are dividend payers too, which means that the income the fund receives from these shares is passed through to investors.

Last year, this ETF doled out a total of $6.36 in dividend distributions per unit. On today’s pricing, that gives the Vanguard Australian Shares ETF a trailing yield of around 7%. If it stays that way in 2023, you would look forward to a yearly income of $350 from your $5,000 investment right off the bat.

But if you are bent on investing in individual shares, there are plenty of good-quality names to choose from too. Some companies I would look to for solid income in 2023 and beyond include Westpac Banking Corp (ASX: WBC), Washington H. Soul Pattinson and Co Ltd (ASX: SOL) and Telstra Group Ltd (ASX: TLS).

These are healthily profitable, dominant and mature companies that (in my view) don’t have any red flags waving present.

The post How I’d invest $5,000 in high-yield ASX shares to earn a second income appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 shares I own for big dividends in 2023
• Invested $1,000 in the Vanguard Australian Shares ETF (VAS) 5 years ago? Here’s how much dividend income you’ve received
• Here’s why 2023 will be a huge year for passive income
• Generations of Aussie investors own this ASX ETF. Do you?
• How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?

Motley Fool contributor Sebastian Bowen has positions in Telstra Group, Vanguard Australian Shares Index ETF, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Telstra Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Westpac Banking. 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Aristocrat Leisure Limited (ASX: ALL)

According to a note out of Citi, its analysts have retained their buy rating and $41.20 price target on this gaming technology company’s shares. Citi has analysed digital bookings data to December and is happy with what it saw. It highlights that bookings lifted on a seasonal Christmas boost last month and that Aristocrat’s Pixel United business continues to outperform. The Aristocrat share price ended the week at $33.20.

Coronado Global Resources Inc (ASX: CRN)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating and lifted their price target on this coal miner’s shares to $2.25. The broker made the move after looking at the mining sector. It believes Coronado Global is a top option for investors looking for met coal exposure following China’s reopening. Particularly if you’re looking for dividends. Goldman is expecting strong met coal prices to allow the company to pay a 21.9 US cents per share dividend in FY 2023. This equates to a 15.5% yield at current prices and exchange rates. The Coronado Global share price was fetching $2.03 at Friday’s close.

Macquarie Group Ltd (ASX: MQG)

Analysts at Morgan Stanley have retained their overweight rating and $215.00 price target on this investment bank’s shares. The broker believes that Macquarie is well-placed to benefit from volatility in commodity markets. Particularly given that approximately a third of its revenue comes from its commodities business. The Macquarie share price ended the week at $178.27.

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

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More reading

• Burning hot: The outlook for ASX 200 energy shares in 2023
• Here are the top 10 ASX 200 shares today
• Buy this ASX 200 bank share with 21% upside: Morgan Stanley
• Why Integrated Research, Macquarie, Pilbara Minerals, and South32 shares are pushing higher
• 3 ASX 200 dividend shares with HUGE passive-income potential for FY24

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 recommended Macquarie 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 chances are you’re feeling pretty crook in the stomach thinking about your finances and investments right now.

“The nights are long, life is eye-wateringly expensive, the world and his wife are on strike and your investments are probably worth a bit less than they were a year ago,” Fidelity International investment director Tom Stevenson said in the UK’s The Telegraph.

“Happy new year.”

So what can we expect in 2023? Stevenson gazed into his crystal ball for some answers.

Stock markets are not the economy

It was about a year ago when stock markets peaked then spent all of 2022 in a quagmire of pessimism.

This behaviour was the perfect demonstration of how shares are far more forward-looking compared to the economy.

“The rest of the world has now caught up, with the International Monetary Fund predicting that a third of the world will be in recession this year.”

So the first piece of advice from Stevenson is to keep looking ahead during 2023 when there will be much noise about how awful the world is going.

“Investors’ first new year resolution should be to lift their gaze above what is certain to be a gloomy cocktail of headlines.”

Second thing to remember is that Stevenson reckons stock markets will start rising well before the real-time economy even looks like it’s recovering.

“They fell in 2022 ahead of the economic challenges we are starting to feel now and they will turn the other way before the green shoots of recovery actually appear,” he said.

“That is directionally what will happen. The exact timing of the market pivot, however, is harder to predict.”

Patience will be handsomely rewarded

Stevenson’s analysis of 150 years of movements in the US suggests that the current cycle has more to run.

“The duration of the current bear market is short if, as is likely, we do suffer a recession this year. This certainly argues against the October low being the trough for the current cycle.”

But to counter this, “deteriorating sentiment” seems to be already priced in.

“That part of the reset has already happened. The 32% decline in the market’s price-to-earnings multiple is in line with the long run average.”

Therefore, Stevenson’s advice is that patience will be required for a revival in stock prices.

“I expect the October low to be retested, perhaps more than once this year. The principal driver of that will be lower earnings rather than a further fall in valuation.”

He noted from history that it’s not impossible for the market to fall in two consecutive years, but it’s highly unusual.

And staying invested will ultimately prove fruitful for those who can stick it out.

“The average gain from a bear market low to the next peak is almost 90% over three-and-a-half years,” said Stevenson.

“So, really, despite it all, happy new year.”

The post Get ready for shares to take off in 2023: expert appeared first on The Motley Fool Australia.

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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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Every other week it seems that there’s another ASX lithium share trading on the Australian share market.

And while many lithium shares have proven to be very successful investments, the industry’s outlook has changed recently and uncertainty is starting to creep in regarding future prices of the white metal.

The likes of Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) are printing money right now thanks to sky high prices for the battery making ingredient, but will this be the case when explorers like Aruma Resources Ltd (ASX: AAJ), Azure Minerals Ltd (ASX: AZS), and Red Dirt Metals Ltd (ASX: RDT) finally dig something out of the ground?

Goldman Sachs doesn’t appear to believe it will be the case. This week, the broker reiterated its view that it believes lithium prices will start to tumble from the second half of 2023. This is supported by recent weakness in lithium futures contracts. Its analysts explained:

Our commodity team expect lithium prices through 1H23 to reflect the near-term tightness and lagging spodumene contract price pass-through (highlighted by PLS’ recent offtake repricing) before declining over 2H23, where we note 2024 futures have continued to pull back. While we see earnings support for the Australian stocks over 12-18 months on price lags, we expect lithium stock prices to reflect lithium commodity price movements as prices decline from record peaks.

Lithium price forecast

Goldman is now forecasting the following average prices for these lithium types in the coming years compared to current spot prices:

• Lithium carbonate (per tonne)
  • Spot: US$66,750
  • 2023: US$53,300
  • 2024: US$11,000
  • 2025: US$11,000
• Lithium hydroxide (per tonne)
  • Spot: US$76,650
  • 2023: US$58,650
  • 2024: US$12,500
  • 2025: US$12,500
• Lithium spodumene 6% (per tonne)
  • Spot: US$5,990
  • 2023: US$4,330
  • 2024: US$800
  • 2025: US$800

Are these forecasts absurd?

When you look at the prices above, you might be forgiven for thinking that Goldman Sachs’ analysts have made a huge mistake. How could prices collapse so much?

But the reality is that these forecasts are more than realistic. In fact, the prices are still better than what lithium was commanding in 2020.

At that point, the different lithium types were commanding the following per tonne:

• Lithium carbonate – US$6,943
• Lithium hydroxide – US$9,978
• Spodumene 6% – US$429

So, while it would be a huge drop from current spot prices, it isn’t inconceivable that this could happen if supply starts to outpace demand.

All in all, these are interesting times for ASX lithium shares.

The post Own ASX lithium shares? Here’s the latest lithium price forecast appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Friday
• Brokers name 3 ASX shares to buy today
• Broker says Allkem share price can rise 20% even if lithium prices fall
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem. 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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