Category: Stock Market

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Some might think Apple Inc‘s (NASDAQ: AAPL) best days are behind it. Revenue growth has ground to a halt. The company’s biggest new product in years, its Vision Pro mixed reality headset, might be a commercial flop. Apple’s reign as the largest company in the world based on market cap has ended. It’s now in third place behind Microsoft and Nvidia.

Don’t give up on Apple just yet, though. Anytime people have done so in the past, the company has reinvented itself and gone on to achieve tremendous success. Apple just might do it again. And the company could have a clear path to making it happen. Meet Apple’s new $186 billion market opportunity.

Living on the edge

Artificial intelligence (AI) could be bigger than the internet. That’s not just my opinion. Alphabet CEO Sundar Pichai and Altimeter Capital CEO Brad Gerstner think so. Nvidia CEO Jensen Huang believes that one specific type of AI — generative AI — will be bigger than the internet all by itself.

So far, AI development has been primarily done in the cloud. That’s why Nvidia’s data center revenue soared 427% year over year in the first quarter of 2024 and now makes up nearly 87% of the company’s total revenue.

But this story could soon change as edge AI gains momentum. Edge AI is the deployment of AI on devices near where data is created (on the “edge”). There are several advantages of edge AI compared to AI on the cloud, including lower latency (delays in data transfer) and bandwidth requirements along with increased privacy.

How big could the edge AI market be? Estimates vary, but there’s a consensus that the market will grow rapidly. Market researcher Market.us predicts the edge AI market will expand by a compound annual growth rate (CAGR) of 25.9% to $143.6 billion by 2032. Fortune Business Insights projects a CAGR of 27.5% with the edge AI market topping $186 billion by 2032.

Why Apple could be the leader in edge AI

Morgan Stanley wrote in a 2023 report that it believes “Apple will emerge as one of the key winners” in the edge AI market. I wholeheartedly agree with that assessment.

Edge AI must run on devices. Apple has over 2.2 billion devices in active use throughout the world. This number largely consists of iPhones, but the company also has other devices, including computers and wearables.

Importantly, Apple already has chips powerful enough to run AI apps on its devices. The company’s next-generation iPhone chip on the way will almost certainly provide even better AI performance.

Apple has the ecosystem to foster edge AI software development by other companies. It also has deep pockets to fund internal R&D and acquisitions to advance edge AI technology going forward.

Some might be excited by Apple’s AI announcements at its Worldwide Developers Conference (WWDC) this week. Others could be disappointed. Either way, any WWDC revelations are only the beginning. Look for Apple to continue to launch edge AI functionality over the coming years.

Does this opportunity make Apple stock a no-brainer buy?

Even for a company that generates as much revenue as Apple does, the edge AI market opportunity is big enough to move the needle significantly. But does this opportunity make Apple stock a no-brainer buy? Not necessarily.

Apple could squander its opportunity. It’s possible that edge AI won’t be as impactful as many expect. I don’t expect either to happen, though. However, Apple won’t be a no-brainer buy until there’s sufficient reason to believe the company will return to strong growth. We’re not at that point yet, but we could be relatively soon.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Meet Apple’s new $186 billion market opportunity appeared first on The Motley Fool Australia.

More reading

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• ASX 200 shares vs. property: AMP reveals predictions for 2024 growth

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Apple, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a disappointing decline. At the time of writing, the benchmark index is down 1.5% to 7,741.3 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Chalice Mining Ltd (ASX: CHN)

The Chalice Mining share price is down 8% to $1.51. This morning, this mineral exploration company released a metallurgical testwork and pre-feasibility study (PFS) update. Management advised that results indicate potential upside for overall metal recoveries. However, cleaner stage tests under locked-cycle conditions are required to quantify the impact. Chalice continues to target a final investment decision in late 2026 and is then aiming to commence production all the way out in 2029. It is also worth noting that most miners are sinking on Tuesday and dragging on the performance of the ASX.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price is down 6% to $13.70. This appears to have been driven by a bleak session for gold on Friday. The precious metal had its worst session in several years at the end of last week. And while it rebounded on Monday, that wasn’t enough for investors to stop hitting the sell button today. The S&P/ASX All Ordinaries Gold index is down 5.7% in afternoon trade.

Peninsula Energy Ltd (ASX: PEN)

The Peninsula Energy share price is down 9% to 10 cents. This has been driven by the completion of the retail component of the uranium developer’s entitlement offer. It has raised a total of $39.8 million at an offer price of 10 cents per share. This follows the successful completion of a placement which raised approximately $52.9 million and the institutional entitlement offer which raised approximately $13.3 million. In total, the company has now raised A$105.9 million before costs. The proceeds place Peninsula Energy in a strong financial position and is expected to fully fund operations at the Lance Projects through to sustainable free cash flow.

Service Stream Ltd (ASX: SSM)

The Service Stream share price is down 4% to $1.18. This is likely to have been driven by a broker note out of Macquarie this morning. According to the note, the broker has downgraded the essential services company’s shares to a neutral rating, but with an improved price target of $1.30. Macquarie made the move largely on valuation grounds following a strong run since the release of its half year results. Outside its valuation, the broker is positive on the company’s outlook.

The post Why Chalice Mining, Northern Star, Peninsula Energy, and Service Stream shares are sinking appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and 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.

Finding undervalued stocks can be a great way to score big in the share market. One way to spot these opportunities is by looking for stocks trading below their book value. 

Book value represents a company’s worth based on its assets minus its liabilities. Think about your house, for example. If your house is valued at $1 million and you have a mortgage of $300,000, the net asset value (NAV) of your house is $700,000.

When a stock’s market price is below its NAV or book value, it might mean the market is undervaluing the company. 

While book value and NAV are similar in their meaning, book value refers to the value as reported in the balance sheet, whereas NAV could be based on what a company believes is the fair value based on the market value of the assets.

Before we dive in, please note this information is for idea-generation purposes only. Always do your own research or talk to a financial advisor before making an investment decision. 

The price-to-book value (P/B) ratio-based approach is easy to understand and valuable for industries like real estate, where physical assets are essential.

On the other hand, let’s remember some stocks are cheap for a reason, such as poor business prospects. Also, different accounting methods can affect the calculation of book value, potentially misleading investors. 

With that caveat out, here’s my list of three ASX shares trading under their book values today.  

HomeCo Daily Needs REIT (ASX: HDN)

HomeCo Daily Needs is a property trust that owns and manages high-quality, convenience-based retail assets across Australia. The company focuses on neighbourhood retail and large-format retail centres. The REIT boasts over 1,200 tenants spread across 51 properties. 

The company reported a book value of approximately $3 billion in December 2023, or a book value per unit of $1.44, representing a P/BV ratio of 0.9x using today’s share price.

It is a consistent dividend payer, offering a dividend yield of 6.7% using its distributions over the last twelve months. 

Morgans recently recommended HomeCo Daily Needs REIT to buy due to the resilience of its cash flows and its exposure to accelerating click and collect trends. 

Rural Funds Group (ASX: RFF)

Rural Funds Group owns and leases a diversified portfolio of high-quality farming assets. The REIT’s investments span various sectors, including cattle, vineyards, cotton, and almonds, providing stable returns for its investors. 

Rural Funds is trading at approximately 0.7x P/BV ratio using its reported book value of $1.8 billion as of December 2023. Its book value represents $2.74 on a per-unit basis, having grown from $1.55 in FY19.

The P/BV ratio becomes even more attractive using what Rural Funds itself believes is the true value of its assets. The business discloses its adjusted net asset value (NAV) which includes the market value of its water entitlements. Its adjusted NAV on 31 December 2023 was $3.07 per unit, indicating an adjusted P/BV ratio of 0.66x.  

As my colleague Tristan highlighted, Rural Funds is an ASX dividend stock worth considering. The business pays an annual distribution of 11.73 cents per unit, offering a distribution yield of 5.8% at the current share price. 

Australian Agricultural Company (ASX: AAC)

As one of Australia’s largest integrated cattle and beef producers, Australian Agricultural Company manages a diverse portfolio of properties across approximately 6.4 million hectares across Queensland and the Northern Territory. 

The company produces high-quality beef, catering to the domestic and international markets. 

The global cattle market has had a rocky ride over the past few years, pushing pressure on Australian Agricultural Company’s valuation.

The company is valued at a P/BV ratio of 0.6x, compared to its historical range of 0.5x to 1.4x. 

This is one of the reasons why Bell Potter maintained its positive view on the company. The broker said: 

RFF trades at a historical high discount to its market NAV per unit ($2.78 pu) at ~28%. While we are in general seeing large discounts to NAV in ASX listed farming and water assets to market NAV, the discount that RFF is trading appears excessive and we are seeing a valuable opportunity in RFF.

The Australian Agricultural Company share price is trading at $1.47 at the time of writing.

The post 3 ASX shares trading below their book values appeared first on The Motley Fool Australia.

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Motley Fool contributor Kate Lee 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 Rural Funds Group. The Motley Fool Australia has recommended HomeCo Daily Needs REIT. 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) is having a very tough start to the week. In afternoon trade, the benchmark index is down 1.45% to 7,745.6 points.

Four ASX shares that are not letting that hold them back today are listed below. Here’s why they are rising:

Arizona Lithium Ltd (ASX: AZL)

The Arizona Lithium share price is up 9% to 2.4 cents. This morning, this lithium explorer announced that it has received approval from the US Bureau of Land Management for the Permit of Exploration (POE) at the Big Sandy Lithium Project in Arizona, USA. This POE includes 131 exploration holes and a bulk sample. Arizona Lithium’s managing director, Paul Lloyd, commented: “This represents a substantial development opportunity for a deposit that presently contains a JORC resource of 320,800 tonnes LCE. With only 4% of the project drilled to date, we are looking to expand the existing Resource and validate the exploration target.”

Bapcor Ltd (ASX: BAP)

The Bapcor share price is up 13% to $4.93. This follows confirmation that the auto parts retailer has received an unsolicited, indicative, conditional and non-binding takeover proposal from Bain Capital. Under the terms of the indicative proposal, Bapcor shareholders would receive $5.40 cash per share from the private equity giant. The Bapcor board is currently considering the offer and has warned that “there is no guarantee that the Indicative Proposal put forward by Bain Capital will result in a binding offer or that any transaction will eventuate.”

Race Oncology Ltd (ASX: RAC)

The Race Oncology share price is up 3% to $1.84. This morning, this oncology company announced that the United States Food and Drug Administration (FDA) has extended Orphan Drug Designation (ODD) to its proprietary formulation of bisantrene, RC220. The ODD provides a wide range of benefits to sponsors of new treatments for orphan diseases. This includes seven-year US marketing exclusivity for approved orphan products. The company’s chief medical officer, Dr Michelle Rashford, said: “Orphan Drug Designation is a major asset beyond AML as it enables Race to work closely and constructively with the FDA on all of our RC220 bisantrene clinical programs as we progress towards opening an FDA IND in 2025.”

Tower Ltd (ASX: TWR)

The Tower share price is up 4% to 80 cents. This follows a guidance upgrade from the New Zealand based insurer. It now expects its underlying net profit after tax for the 12 months ending 30 September to be greater than NZ$40 million. This is up from its previous guidance for greater than $35 million. This increase is due to a continuation of positive trading conditions including unseasonably benign weather in the past two months.

The post Why Arizona Lithium, Bapcor, Race Oncology, and Tower shares are pushing higher appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The AGL Energy Ltd (ASX: AGL) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy provider closed on Friday trading for $10.49. During lunch hour trading, shares are swapping hands for $10.39 apiece, down 0.95%.

However, for some context, the ASX 200 is also struggling today, down 1.46% at this same time.

Here’s what AGL investors are mulling over today.

AGL share price slides amid tech costs

The AGL share price is in the red today after the company reported it has entered into an agreement with Kaluza, a United Kingdom-based technology platform that digitises and simplifies energy billing. Kaluza currently services more than six million meters at OVO Energy in the UK.

The agreement is part of AGL’s ongoing Retail Transformation Program.

AGL expects to realise significant cost reduction, noting the platform also enables faster product innovation to facilitate the energy transition. The ASX 200 utility will transfer its four million consumer electricity and gas customer services onto the Kaluza platform over the next three years.

The company’s Retail Transformation Program aims to cut operating costs and capital expenditure. Net benefits are expected to commence in FY 2028 with pre-tax cash savings of approximately $70 million to $90 million a year from FY 2029.

But the AGL share price could be under some pressure with management estimating $300 million in costs over four years (commencing in FY 2024) to cover the residential and small business customer solution component of its Retail Transformation Program.

AGL also said it will invest around $150 million in the form of preference shares in Kaluza to fund the next phase of its growth. This will see AGL holding a 20% interest directly in Kaluza.

What did management say?

Commenting on the agreement that’s yet to boost the AGL share price, CEO Damien Nicks said, “This represents a significant milestone in our transformation journey to connect more customers to a sustainable future.”

Nicks added:

The technology market is changing materially with the emergence of new core utility platforms offering greater flexibility and speed, which makes it imperative to partner with industry leaders, and is why we have chosen Kaluza.

Kaluza is owned by OVO Energy. AGL acquired a majority stake in OVO’s Australian business in 2021.

On that front, Nick said:

OVO Energy Australia has experienced strong customer growth, with all customers migrated to Kaluza in 2023 while achieving a Net Promoter Score (NPS) of 40+.

As a result of the OVO Energy Australia investment and our proposed 20% equity interest in Kaluza, AGL has strengthened its relationship with the OVO Group which will enable us to accelerate our strategic ambition to support customers as they decarbonise and electrify.

The AGL share price is up by around 7% so far in 2024.

The post AGL share price slides amid $450 million tech cash splash 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 S&P/ASX 200 Index (ASX: XJO) is tumbling on Tuesday, down 1.3% to 7,758 points in early trading.

ASX 200 shares have risen by 1.71% in the year to date. The benchmark index’s journey in 2024 has been bumpy, but it has included a new all-time record high of 7,910.5 points set on 2 April.

Shares vs. property: Which one is winning in 2024?

Meantime in the property arena, bricks-and-mortar investments in most capital city and regional markets have experienced a smoother ride this year.

The national median home value is up 3% in the year to date, according to the latest CoreLogic data.

Regional property values are growing faster than city values. The combined regional markets’ median is up 3.3%, and the combined capital city markets’ median is up 2.9%.

Therefore, property is outperforming ASX 200 shares in the year to date.

But AMP chief economist Dr Shane Oliver reckons that’s going to change.

ASX 200 shares to deliver 9% growth in 2024: AMP

AMP anticipates 9% growth for ASX 200 shares in 2024 vs. 5% average growth in property values.

In a new blog, Dr Oliver says ASX 200 shares should rise from here.

He tips the benchmark index to settle at about 7,900 points by year’s end. That’s just below its April peak and indicates there is more volatility ahead for ASX 200 shares.

Dr Oliver said:

Easing inflation pressures, central banks moving to cut rates and prospects for stronger growth in 2025 should make for reasonable investment returns this year.

However, with a high risk of recession, delays to rate cuts and significant geopolitical risks, the remainder of the year is likely to be rougher and more constrained than the first three months were.

Property prices to rise but at a slower pace vs. ASX 200 shares

In terms of property values, Dr Oliver expects lower average price growth this year compared to 2023.

He comments:

So, after an average 8% gain last year, we expect that national average home prices will rise again this year but with national average gains a bit more constrained at 5% as still high interest rates act to restrict demand and rising unemployment boosts distressed listings.

The supply shortfall points to upside risk, but the delay in rate cuts and talk of rate hikes risks renewed falls in property prices as it’s likely to cause buyers to hold back and distressed listings to rise.

Dr Oliver expects a continuing divergence in the performance of capital city markets, commenting:

Home price gains are likely to remain widely divergent though with continued strength likely in Perth, Brisbane and Adelaide for now partly helped by interstate migration but softness in other cities, particularly Melbourne and Hobart.

CoreLogic points out that the supply of homes for sale is a key element keeping price growth strong in Perth, Adelaide, and Brisbane. Stocks levels are currently 40% below their five-year average for this time of year in Perth and Adelaide and 34% lower in Brisbane.

Looking ahead, Dr Oliver says there are signs of weakness in property.

Interestingly, there are some signs of a softening at the margin: auction clearance rates have cooled from their highs; new listings are up sharply in some cities possibly reflecting rising distressed listings; and after leading early in the property upswing, top quartile property price gains are the weakest in most capital cities as affordability and borrowing constraints are starting to bite pushing buyers into lower-priced property.

If you are considering ASX 200 shares vs. property for your next investment, check out our article on the pros and cons of each asset class.

The post ASX 200 shares vs. property: AMP reveals predictions for 2024 growth 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 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 Woodside Energy Group Ltd (ASX: WDS) share price is in the green.

Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas stock closed on Friday trading for $27.21. In earlier trade, shares were swapping hands for $27.49 apiece, up 1.0%.

At the time of writing, the ASX 200 energy stock has given back some of those gains and is trading for $27.23 a share, up 0.1%.

That still sees the Woodside share price racing ahead of the ASX 200 today, with the benchmark index down 1.3% at this same time.

Here’s what’s happening.

What’s supporting the Woodside share price today?

The Woodside share price looks to be catching tailwinds from two fronts today.

First, a rising oil price.

Global oil prices saw a sizeable uptick over the long King’s Birthday weekend. On Friday, Brent crude oil was trading for $US79.62 per barrel. Today that same barrel is trading for US$81.88, up 2.8%.

Oil prices have been under pressure recently following the decision by the Organization of Petroleum Exporting Countries and their allies (OPEC+) to begin unwinding their production cuts in the fourth quarter of 2024.

Noting the three-week slide in oil prices, Fawad Razaqzada, a market analyst at City Index said (quoted by Bloomberg), “At the start of this week, traders have decided to buy the dip. With the US driving season underway, demand is likely to recover, keeping the downside limited for now.”

Also likely helping the Woodside share price outperform today is the company’s announcement it has achieved its first oil from the Sangomar field, located 100 kilometres offshore of Senegal. Woodside highlighted that this marks the safe delivery of Senegal’s first offshore oil project.

The deepwater Sangomar Field Development Phase 1 project includes a stand-alone floating production storage and offloading (FPSO) facility. The nameplate capacity stands at 100,000 barrels per day. The project includes subsea infrastructure designed to allow further development phases.

“This is a historic day for Senegal and for Woodside,” Woodside CEO Meg O’Neill said.

O’Neill continued:

First oil from the Sangomar field is a key milestone and reflects delivery against our strategy. The Sangomar project is expected to generate shareholder value within the terms of the production sharing contract.

Delivering Senegal’s first offshore oil project safely, through a period of unprecedented global challenge, demonstrates Woodside’s world-class project execution capability. We are proud of the relationships we have formed with PETROSEN, the government of Senegal and our key international and local contractors to develop this nationally significant resource.

Commenting on the first oil milestone that could help support the Woodside share price longer-term, Thierno Ly, general manager of PETROSEN said:

First oil from the Sangomar field marks a new era not only for our country’s industry and economy, but most importantly for our people…

We have never been so well positioned for opportunities for growth, innovation, and success in the economic and social development of our nation.

Woodside said the project’s cost estimate remains within the provided range of US$4.9 billion to US$5.2 billion.

The drilling campaign is ongoing, and Woodside said it expects to continue commissioning activities and ramping up production through 2024.

The Woodside share price is down 20% over the past 12 months.

The post Why is the Woodside share price racing ahead of the benchmark today? 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.

Today, I will be looking at two ASX large-cap stocks that are catching investors’ eye with their recent performance.

ANZ Group Holdings Ltd (ASX: ANZ) and Qantas Airways Ltd (ASX: QAN) have both seen significant gains this year and are on expert’s radars.

And with the S&P/ASX 200 Index (ASX: XJO) advancing just a little more than 2% this year to date, these could be attractive options for anyone looking to add solid performers to their portfolio.

Here’s why these two ASX large caps could be cheap right now.

Is ANZ a cheap ASX large-cap stock?

ANZ shares are currently trading at $29.18 just after the open on Tuesday. This marks a nearly 13% increase this year year-to-date. According to Goldman Sachs and UBS, ANZ shares could continue to deliver impressive returns.

UBS has set a price target of $30 for ANZ shares, implying an around 3% upside from the current level. According to my colleague Tristan, the broker reckons ANZ will generate earnings per share (EPS) of $2.29 in FY24, with a growth of 5.7% to $2.42 in FY25.

This growth could stem from ANZ’s recently announced $2 billion share buyback, which reduces the number of shares on issue and enhances EPS.

Meanwhile, Goldman Sachs analysts rate ANZ a buy thanks to its “large pipeline available which can be used to offset cost inflation”.

“We continue to see upside for [ANZ] Group returns due to accretive mix shifts in the Institutional business towards higher ROE Payments and Cash Management business”, the broker said, adding ANZ trades at a discount to the sector, excluding dividends.

ANZ has outperformed the ASX 200 Index by over 18% in the last 12 months, with a 26% rise compared to the index’s 9% gain. It currently trades at a price-to-earnings ratio (P/E) of 12.8.

This tells me investors are paying less for $1 of the banks’s earnings than they are for the iShares Core S&P/ASX 200 ETF (ASX: IOZ), the index fund tracking the benchmark, with a P/E of 18 times.

The earnings yield is 7.7% at this P/E. When combined with the ASX large-cap stock’s trailing dividend yield of 6.1%, this represents potential value in my opinion.

Are Qantas shares undervalued?

The Qantas share price is up 15% this year and currently trades at $6.20 apiece. Despite this rise, many analysts believe Qantas shares are still undervalued compared to its peers.

Goldman Sachs recently added Qantas to its June Asia-Pacific conviction list. The broker says the airline is primed to grow beyond its pre-pandemic ranges. It expects Qantas to produce EPS of 85 cents in FY24 and 96 cents in FY25, which is significantly higher than the 57 cents per share reported in 2019.

Qantas currently trades at a P/E ratio of 6.7, which is well below the average P/E of 9.1 for its regional and US competitors, according to Goldman.

If Qantas hits its projected EPS of 96 cents in FY25 and its P/E converges to the peer average, this implies a potential share price of $8.64, as I’ve discussed previously.

Goldman Sachs has set a price target of $8.05 for Qantas shares, implying a potential upside of 29% from the current price.

This valuation makes Qantas shares look cheap in my view. It offers potential upside for investors with a substantial margin of safety.

But it’s not just the potential disconnect in valuation. Several factors could drive Qantas shares higher. Goldman Sachs highlights that the airline’s cost-out program, operational performance improvements and potential positive trading updates could also boost investor confidence.

It also expects Qantas to potentially return $1.2 billion to shareholders as dividends over FY 2025-2027.

Conclusion

ANZ and Qantas might present compelling opportunities for investors seeking ASX large-cap stocks with strong growth potential.

With their solid performance and attractive valuations, experts say these stocks could be worth considering for your portfolio.

As always, conduct your own due diligence and remember to consider your personal financial circumstances.

The post 2 ASX large-cap stocks that look cheap right now appeared first on The Motley Fool Australia.

More reading

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) is down 1.1% today, but you can’t blame this rocketing ASX 200 share.

Shares in the auto parts company closed on Friday trading for $4.36. In earlier trade on Tuesday, shares were swapping hands for $4.99 apiece, up 14.5%. After some likely profit-taking, shares are currently trading for $4.88, up 11.9%.

This comes after management confirmed media speculations of a potential takeover offer at a significant premium to Friday’s closing price.

Any guesses?

If you said Bapcor Ltd (ASX: BAP), give yourself a virtual gold star.

Here’s what’s happening.

ASX 200 share in takeover crosshairs

The ASX 200 share is rocketing today after reporting it had received a non-binding, indicative proposal from Bain Capital after market close on Friday.

The United States-based private investment firm is seeking to acquire all of Bapcor’s shares by way of a scheme of arrangement. This would see Bapcor shareholders receive $5.40 cash per share, adjusted for any dividends paid or declared after this proposal.

That’s almost 24% higher than Friday’s closing price, explaining why the Bapcor share price is having such a stellar run today.

Bain’s offer values the ASX 200 share, which has some 1,100 Autobarn, Autopro and Burson stores, at more than $1.8 billion.

Amid the media speculations of a takeover offer, the board said it was disclosing its receipt of the indicative proposal before concluding its assessment. The board stressed that the proposal remains subject to a number of conditions being met.

“The board cautions that at this time there is no guarantee that the indicative proposal put forward by Bain Capital will result in a binding offer or that any transaction will eventuate,” they stated.

Macquarie Capital has been appointed as Bapcor’s financial adviser and Allens as its legal adviser.

Investors in the ASX 200 share were advised they do not need to take any action at this time.

How have Bapcor shares been tracking?

Bain Capital is lobbing its bid for Bapcor after a sizeable share price retrace for the auto parts retailer.

Before market open today, the ASX 200 share was down almost 27% over the past 12 months. Though that doesn’t include the 21 cents a share in fully franked dividends Bapcor paid out over this period.

The stock has been under pressure following profit downgrades amid rising costs. The company has also struggled with its top management, with Paul Dumbrell backing out of his appointment as CEO in April, just days before he was meant to take up the helm.

The post Guess which ASX 200 share just rocketed 15% on a $1.8 billion takeover offer appeared first on The Motley Fool Australia.

More reading

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

The GQG Partners Inc (ASX: GQG) share price has delivered excellent performance over the last six months, surging more than 70%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has gained around 9% over the same time period.

Despite the huge rise in the GQG share price, I still think it’s a long-term opportunity due to the progress the business is making and what I believe is still a good valuation.

The fund manager, based in the US, offers clients a variety of different investment strategies including US shares, emerging market shares, and global shares. It also offers investment options like dividend shares.

There are a few reasons I’m still excited about this company.

Solid growth rate

GQG’s growth is reliant on an increase in its funds under management (FUM).

The company’s main investment strategies have outperformed their respective benchmarks, which helps organically grow the FUM and also helps attract more FUM from clients.

As of 31 May 2024, GQG’s FUM had reached US$150.1 billion, up from US$120.6 billion at 31 December 2023. That’s an increase of 24% in just five months.

In the five months to May 2024, the ASX All Ords company experienced net inflows of US$9.1 billion – it’s seeing a lot of extra client money flowing in, which is compelling and suggests inflows could continue at a decent rate in the coming months.

The business charges minimal (or no) performance fees via its funds, so nearly all of its revenue comes from management fees. FUM growth is key to delivering revenue growth.

Operating leverage

Fund managers can deliver rising profit margins as they grow because their costs may not rise as much as revenue.

For example, a funds management business doesn’t need an additional 10% more people or a 10% bigger office if its FUM grows by 10%.

The business has rapidly grown in the last two years, so it has increased its expenditure to reflect the global fund manager it has become, including geographic expansion (such as Australia). But, I believe operating leverage will be displayed in the next few years and the company’s profit margins can increase.

In GQG’s 2023 result, net revenue rose 18.5% and net profit after tax rose 18.7%.

Low earnings multiple

Fund managers don’t usually trade on a high price-to-earnings (P/E) ratio, so we’re able to buy the earnings at a reasonable multiple compared to some other sectors.

GQG is valued at 16x FY23’s distributable earnings and the fund manager has grown significantly since FY23. Its average FUM for FY23 was US$101.9 billion – the ASX share’s FUM (as at May) is currently 47% higher than this, suggesting pleasing earnings growth over the next 12 months.

The company is committed to a dividend payout ratio of 90% of its distributable earnings. Based on Commsec’s dividend estimate for FY24 and FY25, GQG is valued at 13x FY24’s estimated distributable earnings and 12x FY25’s estimated earnings.

Good dividend

GQG is predicted to pay an annual dividend per share of 18.2 cents in FY24 and 19.9 cents per share in FY25, translating into forward dividend yields of 6.9% and 7.5%, respectively (GQG’s financial year runs on the calendar year, so the FY24 annual dividend is still a prediction).

While these are not the biggest dividend yields on the ASX, I think they could be among the better yields from a company that’s still growing at a decent pace.

The post This low-profile $7.8 billion ASX share has risen 70% in 6 months. I’d still buy it! appeared first on The Motley Fool Australia.

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• 2 great value ASX shares I want to buy
• How to choose ASX shares for passive income

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.