Category: Stock Market

The Santos Ltd (ASX: STO) share price is marching higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $8.01. In morning trade on Thursday, shares are changing hands for $8.06 apiece, up 0.6%.

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

This comes following the release of Santos’ quarterly update for the three months ending 30 June.

Read on for the highlights.

Santos share price higher on production lift

Investors are bidding up the Santos share price today after the company reported quarterly sales revenue of US$1.3 billion. That’s roughly equivalent to revenue in the prior corresponding quarter.

Production hit 22.2 million barrels of oil equivalent (mmboe), up 2% quarter on quarter.

Gearing was reported at 19.9%, excluding operating leases. Including those leases, gearing stands at 23.5%.

And free cash flow from operations came in at US$380 million. Santos said it expects its half-year free cash flow to reach roughly US$1.06 billion.

Commenting on the key metric helping lift the Santos share price today, CEO Kevin Gallagher said, “First half cash flow of almost US$1.1 billion positions us well to fund shareholder returns, backfill and sustain our existing business, and grow our Santos Energy Solutions business.”

The quarter also saw Santos execute a binding long-term LNG supply and purchase agreement with Hokkaido Gas to provide portfolio LNG of some 400,000 tonnes per year for 10 years, commencing in 2027.

On the major project front, the Barossa Gas Project is 775 complete; the Pikka Project is 56.2% complete; and the Moomba phase one Carbon Capture and Storage (CCS) Project is 92% complete.

“Our major projects continue to deliver to plan,” Gallagher said.

He added:

I am very pleased that both the Barossa pipelaying activities and the installation of the modules onto the FPSO in Singapore are now complete and other activities are on track for offshore commissioning to commence in the first quarter of 2025. The Pikka project has had a strong first winter season with the team delivering significant progress on the North Slope, with some pleasing well results…

We can now see line of sight to our major projects progressively coming online, putting us in a strong position to deliver sustainable, competitive shareholder returns over the long term.

What’s next?

Looking at what could impact the Santos share price in the months ahead, the company is forecasting 2024 production of 84 mmboe to 80 mmboe with sales volumes of 87 mmboe to 93 mmboe.

Total capital expenditure guidance (including major project and decommissioning) is around $2.85 billion for the year. Unit production costs are expected to be in the range of $7.45 to $7.95 per barrel of oil equivalent (boe).

“Our focus for 2024 is on continuing to drive the disciplined low-cost operating model across the business and the execution of the Moomba phase one CCS project, Barossa Gas Project, and Pikka Project, whilst maintaining a strong balance sheet,” Gallagher said.

Santos will report its full half-year results on 21 August.

With today’s intraday moves factored in, the Santos share price is up 7% over 12 months. The ASX 200 energy stock trades on a 3.5% unfranked dividend yield.

The post Santos share price marching higher on US$1.1 billion first half cash flow 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.

Domino’s Pizza Enterprises Ltd (ASX: DMP) shares are under pressure on Thursday morning.

In morning trade, the ASX 200 pizza chain operator’s shares are down 9% to a 52-week low of $32.70.

Why are Domino’s shares crashing?

Investors have been selling the company’s shares this morning following the release of a business update.

According to the release, Domino’s has now completed specific works that were underway in Japan and France to identify improvements for these markets.

In Japan, a comprehensive review of store locations has now been completed and a complete review of marketing and pricing is underway. This will result in the closure of up to 802 low volumes stores across the country.

However, management notes that the majority of delivery customers previously serviced by the closed stores will be able to be serviced by neighbouring stores. This is expected to improve unit economics and minimising the total sales impact for the market.

As the aggregate contribution of these low volume stores is loss-making, the closures will have a positive impact on earnings. This will then be reinvested into additional marketing and advertising to reach more customers and lift order counts in this low-frequency market.

Management expects a return to positive same store sales in Japan in FY 2025, with core margin improvements.

In France, it is targeting a net 10-20 store reduction in FY 2025. Once again, it is expecting the majority of delivery orders from these stores to be serviced by neighbouring stores, resulting in earnings improvements.

Group outlook for FY 2025

With ongoing positive performance from Australia/New Zealand, Germany and Singapore, and recent performance improvement in Belgium, Netherlands and Luxembourg, Domino’s Pizza Enterprises anticipates gross store openings will be ~3% of the network.

After the store closures outlined above, and the typical level of store closures year-to-year, store growth is expected to be flat to slightly positive in FY 2025. After which, it is stepping up to 3-4% (net growth) in FY 2026.

Beyond this, management continues to see opportunities to grow its network to 7,100 stores over the long term. This is 1.9x the size of its current network.

Though, it notes that this target could be “conservative” given that it is “modelled on significantly lower store penetration than established markets, even where countries have larger existing pizza markets.”

Broker reaction

Analysts at Goldman Sachs have responded relatively positively to the update. It said:

We view this announcement as an incrementally positive step in restoring quality of the store network in the business, without significantly damaging FY25e Group EBIT vs Consensus.

In our European Investor Day preview, we highlighted that a critical pivot in strategy that we would need to turn positive is “re-prioritizing store unit economics over store growth… to improve the payback period attractiveness for Franchisees and ultimately re-stimulate store expansion” and through the emphasized focus on 1) stepping up on digital investments including loyalty, store kiosks and aggregators in Germany; 2) restoring store profitability through lifting AWUS in France including higher brand marketing and leaning further into aggregators; as well as 3) today’s announcement of low-performance store closures in both Japan and France, we are seeing that the company is taking more proactive steps to restore a quality franchise network that will enable healthier sustainable growth.

The post Why are Domino’s shares crashing 9% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises and Goldman Sachs Group. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Telix Pharmaceuticals Ltd (ASX: TLX) share price is rising again on Thursday morning.

In early trade, the radiopharmaceuticals company’s shares have hit a record high of $20.76.

Why is the Telix share price at a record high?

Investors have been bidding the company’s shares higher this morning after it released an update on its performance during the second quarter.

According to the release, for the three months ended 30 June, Telix achieved total revenue of approximately US$124 million (A$189 million) This represents an increase of 55% on the prior corresponding quarter and an 8% increase on the previous quarter.

Management advised that this revenue was primarily generated from sales of Telix’s prostate cancer imaging product Illuccix in the United States.

Revenue generated from sales of Illuccix in the United States was approximately US$121 million during the three months.

Guidance upgraded

In light of this strong performance, the company has upgraded its revenue guidance for FY 2024.

It now expects revenue to be in the range of US$490 million to US$510 million (A$745 million to A$776 million at current exchange rates). This represents an increase of approximately 48% to 54% on FY 2023’s revenue.

Telix was previously guiding to revenue of US$445 million to US$465 million for FY 2024, which means it has lifted its guidance by a sizeable 9.9% at the mid-point. This helps explain why the Telix share price is outperforming today.

This revenue guidance is based on approved products in jurisdictions with a marketing authorisation. Telix has also reaffirmed its guidance for research and development expenditure, which remains at an expected 40% to 50% increase compared with 2023. This will be funded by earnings.

The company’s managing director and CEO, Dr Christian Behrenbruch, was rightfully pleased with the quarter. He said:

We have continued to deliver excellent quarterly growth in both revenue and dose volume sales of Illuccix. We have leveraged our unrivalled scheduling flexibility and clinical differentiation, to increase our market share and minimise the impact of new entrants.

Further information, such as profitability, was not released with this update. However, investors won’t have to wait long to see if Telix’s strong profit growth continued during the quarter.

The company revealed that it plans to release its half year results for the six months ended 30 June on 22 August.

Following today’s gain, the Telix share price is now 70% over the past 12 months.

The post Telix share price hits record high on strong quarter and guidance upgrade appeared first on The Motley Fool Australia.

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

The Fortescue Ltd (ASX: FMG) share price is slipping into the red on Thursday morning.

At the time of writing, the iron ore giant’s shares are down 1% to $22.15.

Why is the Fortescue share price falling?

The Fortescue share price is falling this morning in response to the release of an announcement after the market close yesterday.

According to the release, Fortescue is making some big changes to support the simplification of its structure to ensure it remains lean, impactful, and agile.

One of those changes will be a significant reduction in its workforce later this month.

Fortescue advised that it “remains resolute in its commitment to be the world’s leading green technology, energy and metals company” and retains its focus on achieving Real Zero by 2030.

However, as the company has undergone a period of rapid growth and transition, and as part of bringing together Metals and Energy into One Fortescue, it revealed that initiatives are being implemented to simplify its structure, remove duplication, and deliver cost efficiencies.

Management stressed that this is because it must continually evolve to ensure it remains lean, is best positioned to deliver on its strategy, and generate the maximum value for shareholders.

As part of this evolution, approximately 700 people from across Fortescue’s global operations will be offered redundancies. This process is expected to be finalised by the end of July 2024.

Executive appointment

Fortescue has also announced that its acting chief financial officer, Apple Paget, will move into the role of group chief financial officer after serving 11 months acting in the role.

Fortescue notes that Paget joined Fortescue in January 2023 as group manager finance and tax and has 25 years’ experience as a finance executive.

Chief corporate officer Shelley Robertson has also been appointed chief operating officer. Robertson joined the company in October and is an experienced executive with a career spanning 30 years in oil and gas, mining, and renewable energy.

Finally, Fortescue’s assistant company secretary, Navdeep (Mona) Gill, has been appointed as the secretary of the company. Gill has been with Fortescue since 2021, acting as legal manager and assistant company secretary, and replaces Phil McKeiver in the role with immediate effect.

Fortescue notes that this will mean that Fortescue’s board compromising almost 50% women. It also highlights that diversity will continue to be a key measure of its performance, with new targets implemented to drive diversity across the business.

The Fortescue share price is down 2.5% over the past 12 months.

The post Fortescue share price falls after cost-cutting decision appeared first on The Motley Fool Australia.

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

The Accent Group Ltd (ASX: AX1) share price is having a strong start to the session on Thursday.

At the time of writing, the ASX 300 retail stock is up over 7% to $2.11.

Why is this ASX 300 retail stock surging?

Investors have been buying the footwear focused retailer’s shares this morning following the release of a trading update.

According to the release, Accent expects that its earnings before interest and tax (EBIT) will be in the range of $109 million to $111 million in FY 2024. This will be down by 20% to 21.5% from $138.8 million in FY 2023.

However, it is worth noting that this earnings guidance includes an additional charge of approximately $14.2 million relating to its Glue Store brand.

Management notes that it has made a decision to exit 17 underperforming stores where the required returns are not being achieved.

Once these stores are closed, it will result in the Glue Store business consisting of 18 stores (including its digital store). Management expects this change to make the business profitable in FY 2025.

If you were to exclude the Glue Store charge, Accent’s FY 2024 EBIT is expected to be in a range of $123.2 million to $125.2 million. This would mean a 9.8% to 11.2% decline year on year.

And while a decline is not what investors like to see, the ASX 300 retail stock’s result will be largely in line with expectations.

For example, analysts at Bell Potter were forecasting Accent to deliver EBIT of $124.6 million for the year.

Second half improvement

The ASX 300 retail stock’s CEO, Daniel Agostinelli, revealed that the company’s performance has improved in the second half. So much so, it has achieved solid like for like (LFL) sales growth during the half. Agostinelli said:

Trading conditions across the Group in H2 FY24 improved on H1 FY24, with LFL sales in H2 4.1% ahead of prior year. For the full year, total LFL sales are up +1.7% on FY23.

I am pleased with our retail performance in H2 where the Company continued to experience strong momentum in Skechers, The Athlete’s Foot, Hype DC, Stylerunner, Nude Lucy, and Hoka amongst others. The decision to exit the 17 underperforming stores will allow the Glue Store management team to focus on a profitable business comprising 18 stores including digital.

Accent intends to release its full year results for FY 2024 on 23 August 2024.

The post Why is this ASX 300 retail stock surging 7% today? 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 Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Cheap ASX shares can be really good investments if they grow earnings over the longer term. I’ve got my eyes on a few names that could be exciting.

Businesses can sometimes trade at a lower value than what they’re truly worth. Market conditions and volatility can open up contrarian opportunities.

Going against the crowd isn’t always a good idea, but occasionally, the market can be too pessimistic.

I’ll outline two ASX shares that seem like their forward price/earnings (P/E) ratio is too cheap.

AGL Energy Ltd (ASX: AGL)

AGL is one of the largest energy generators and retailers in the country. The AGL share price is close to 50% lower than where it was five years ago.

The company is benefiting from growing energy demand in Australia, which data centres, AI, electric vehicles and population growth could drive. AGL could also benefit from Kaluza, a tech platform that “digitises and simplifies energy billing, reduces costs to serve and enables faster product innovation.” AGL has invested to own a stake in Kaluza.  

It was reported by the Australian Financial Review, that data centres are already taking up 5% of Australia’s electricity. Potential rapid construction around Australia may mean data centre capacity could more than double by 2030, leading to an increase from 1,050MW to 2,500MW. If that happens, it would represent a growth of 13% per year.

How cheap is the ASX share?

The broker UBS suggests AGL could generate earnings per share (EPS) of $1.17 in FY24 and $1.32 in FY28. That puts the current AGL share price at 9x FY24’s estimated earnings and 8x FY28’s estimated earnings.   

Accent Group Ltd (ASX: AX1)

I believe it can be very opportunistic and positive to look at ASX retail shares during difficult economic conditions. It’s unlikely that tough times will last forever, with high inflation and elevated interest rates.

Therefore, a sell-off due to a temporary situation could be a good time to buy this cheap ASX share. As the chart below shows, the Accent share price has dropped more than 20% since April 2023.

The shoe retailer works with a number of global brands like Skechers, Hoka, and Ugg, and the ASX share’s earnings could keep increasing over time as the company rolls out more stores across various brands.

With a larger store network, it is increasing its profit-making potential when conditions do rebound. It was expecting to open at least 20 new stores in the second half of FY24. Keep in mind it’s adding new stores for its owned brands, including Nude Lucy and Stylerunner.

According to the forecast on Commsec, the Accent share price is valued at 12x FY26’s estimated earnings and could pay a grossed-up dividend yield of around 11% in the 2026 financial year.  

The post 2 cheap ASX shares I’m considering buying now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Accent Group and Agl Energy. 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 Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Small cap ASX shares can be great additions to a balanced investment portfolio. This is because they tend to offer stronger than average returns.

However, as they are higher risk options, they are generally unsuitable for investors with a low tolerance for risk.

With that in mind, if your risk tolerance allows for it, here are a couple of small cap ASX shares that could be in the buy zone right now according to analysts:

Aeris Resources Ltd (ASX: AIS)

Analysts at Bell Potter are bullish on this copper miner and see a lot of value in its shares at current levels.

The broker currently has a buy rating and 30 cents price target on its shares. This implies potential upside of 36% for investors over the next 12 months.

Bell Potter believes the company would be a great option for investors looking for copper exposure. It explains:

AIS represents a copper dominant mining exposure whose primary assets are the Tritton Copper Operations in NSW, Cracow Gold Mine in QLD, Mt Colin Copper Mine in QLD. Its near-term outlook is highly leveraged to rising copper grades at the Tritton copper mine, where new high grade ore sources are driving production growth through CY24 and exploration success at Constellation is likely to sustain higher production levels over the long term. The Cracow gold mine in QLD offers an unhedged gold exposure that is highly leveraged to a rising gold price. Recent refinancings have de-risked the balance sheet and we are of the view that AIS is well positioned to deliver on its production targets.

AVITA Medical Inc (ASX: AVH)

Over at Morgans, its analysts think that this commercial-stage regenerative medicine company could be a small cap ASX share to buy.

The broker currently has a buy rating and $5.60 price target on its shares. This suggests that upside of 75% is possible for investors from current levels.

Morgans likes the company due to the huge growth opportunity for its Recell product in numerous markets. It explains:

AVH is a regenerative medicine company focusing on the acute wound care market. It has recently expanded its indication into full thickness skin defects and Vitiligo (US$5bn TAM). The expanded indication in full thickness skin defects has the required reimbursement in place and sales have started. AVH has provided revenue guidance for FY24 of growth of ~64% and importantly has guided to achieving profitability by 3QCY25. At the same time, the company is seeking approval [now has been approved] by the FDA for its automated device RECELL Go, which if successful will launch 1 June 2024, and will be a meaningful driver of rapid adoption by clinicians.

The post These small cap ASX shares could rise 35% to 75% 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 Avita Medical. The Motley Fool Australia has recommended Avita Medical. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

After soaring a whopping 194% over the last 12 months, Nvidia (NASDAQ: NVDA) stock has richly rewarded its near-term investors as it rides a wave of explosive demand for AI hardware. But so far, this industry has been more hype than substance, and Wall Street is beginning to notice. Let’s dig deeper into what the next year could have in store for Nvidia as hype fades and fundamentals start to play a bigger role.

Analysts are starting to sound the alarm

In late 2022 and early 2023, financial media was awash with grandiose visions for the future of AI. PwC expected it to add $15.7 trillion to the global economy by 2030. And Bloomberg Intelligence projected the market to be worth $1.3 trillion by 2032 as the new technology was applied to digital ads, software development, and other services. But now, some on Wall Street are beginning to sing a different tune.

In June, Goldman Sachs released a report suggesting that the roughly $1 trillion in capital expenditures (capex) expected to pour into AI hardware over the coming years may exceed the potential returns. And they have a point.

So far, most consumer-facing generative AI start-ups are generating significant losses. And over the longer term, free, open-source large language models (LLMs) could also commodify the technology, eroding the economic moats for early leaders. This would hurt Nvidia because if its software clients don’t profit from their AI investments, eventually, they will stop spending. But so far, there is no evidence of a slowdown.

The cracks haven’t appeared yet

The good news for Nvidia shareholders is that if the company faces impending doom, there are no signs of it yet. The chipmaker’s rocket-ship rally is still backed by incredible operational performance.

Second-quarter revenue doubled year over year to $13.51 billion, driven by a 171% increase in the data-center segment where Nvidia sells its highest-end graphics processing units (GPUs), like the H100 and A100 used to train and run AI algorithms. For now, supply seems to be outstripping demand. And the company’s gross margin increased from 64.6% to 70.1%, while its profits jumped 843% to $6.19 billion.

That said, the AI boom is getting a little long in the tooth. Over the next 12 months, Nvidia will face difficult comps as it tries to maintain growth against already high prior-year numbers. This could eat away at the stock’s valuation, which seems to be pricing in continued expansion. With a forward price-to-earnings (P/E) ratio of 49, Nvidia trades at a significant premium over the Nasdaq 100‘s forward estimate of around 30.

Is Nvidia stock a buy?

It can be tempting to bet on Nvidia because of its practically exponential stock-price growth and the recent 10-for-1 stock split which makes the $3.18 billion company look deceptively affordable. However, investors who buy now are very late to the party and run the risk of holding the bag if things go wrong.

Over the next 12 months and beyond, the AI industry may face a reckoning as hype begins to fade and consumer-facing applications struggle to show enough revenue and earnings potential to justify the industry’s spending on chips and other hardware. These challenges could put Nvidia’s valuation at risk. And investors may want to stay clear for now.

The post Where will Nvidia stock be in 1 year? appeared first on The Motley Fool Australia.

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

If you’re constructing a passive income portfolio, then having some ASX dividend shares that provide great dividend yields is always a good idea.

But which one could be top options for income investors now? Let’s look at three for investors to consider buying this week. They are as follows:

Dexus Industria REIT (ASX: DXI)

The first ASX dividend share that could be a buy is Dexus Industria.

It is a real estate investment trust with a focus on industrial warehouses. At the last count, it had a total of 91 properties located across major Australian cities with a combined value of $1.4 billion.

Analysts at Morgans are feeling bullish about the company. The broker notes that “DXI’s industrial portfolio remains robust with the outlook positive for rental growth. The development pipeline also provides near and medium-term upside potential and post asset sales there is balance sheet capacity to execute.”

Its analysts believe this will support dividends per share of 16.4 cents in FY 2024 and then 16.6 cents in FY 2025. Based on the current Dexus Industria share price of $2.95, this will mean dividend yields of 5.5% and 5.6%, respectively.

Morgans currently has an add rating and $3.18 price target on its shares.

GDI Property Group Ltd (ASX: GDI)

Another ASX dividend share that could be a top option for income investors is GDI Property.

It is a fully integrated, internally managed property and funds management group with capabilities in ownership, management, refurbishment, leasing, and syndication of properties.

Bell Potter thinks it could be a great option right now and believes it is well-positioned to pay some big dividends in the coming years.

The broker is forecasting dividends per share of 5 cents across FY 2024, FY 2025, and FY 2026. Based on the current GDI Property share price of 59 cents, this implies dividend yields of 8.5% for the next three years.

Bell Potter currently has a buy rating and 75 cents price target on its shares.

Woodside Energy Group Ltd (ASX: WDS)

A third ASX dividend share that analysts are tipping as a buy is Woodside Energy. It is one of the world’s largest energy producers.

Morgans is also tipping its shares as a buy. The broker highlights that its analysts “see now as a good time to add to positions” after recent share price weakness.

As for dividends, the broker is forecasting fully franked dividends of $1.25 per share in FY 2024 and then $1.57 per share in FY 2025. Based on its current share price of $29.40, this represents attractive dividend yields of 4.25% and 5.35%, respectively.

Morgans has an add rating and $36.00 price target on its shares.

The post Buy these ASX dividend shares for passive income appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. 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.

If you have a penchant for ASX growth stocks, like I do, then you may want to check out the one in this article.

That’s because analysts at Goldman Sachs believe it is well-positioned for strong growth and see potential for market-beating returns from its shares.

Which ASX growth stock?

The company in question is Light & Wonder Inc (ASX: LNW).

Formerly known as Scientific Games, Light & Wonder is an American cross-platform global games company that provides gambling products and services.

It listed on the Australian share market just over a year ago. Since then, the ASX growth stock has raced over 70% higher.

However, despite this strong return, analysts at Goldman Sachs believes there’s still plenty of room for its shares to rise further from current levels.

According to a note out of the investment bank this morning, the broker has reaffirmed its buy rating and $190.00 price target on the ASX growth stock.

Based on its current share price of $156.40, this implies potential upside of 21.5% for investors over the next 12 months.

Why is the broker bullish?

Goldman has revealed why it believes that Light & Wonder shares would be a great option for investors.

Its bullish view its based largely on its belief that the company can reach its FY 2025 AEBITDA target of US$1.4 billion, which is ahead of consensus estimates. It named three reasons why:

We believe this will be driven by: 1. Share gains in North America gaming operations (GSe c.16% now to >20% over the mid-term) with strong ANZ performance a lead indicator. LNW is also increasing their R&D spend which will drive the development of top-performing games. 2. SciPlay is out indexing the social casino segment through higher monetisation rates and modest user growth, despite broader industry headwinds. 3. Strong track record in iGaming where LNW’s pedigree in land-based should continue to provide a key advantage in this large and growing market (GSe US$6bn, +14% CAGR).

Goldman also highlights that the company has a strong balance sheet, which it believes provides extra justification for a higher valuation for the ASX growth stock. It adds:

Additionally, LNW has a strong balance sheet now after a period of de-levering, and we think this is a key factor in justifying a valuation uplift with scope for capital management initiatives.

All in all, the broker appears to believe this could make Light & Wonder worth considering if you are looking for new additions to your growth portfolio.

The post 3 reasons this ASX growth stock is a top buy appeared first on The Motley Fool Australia.

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