Category: Stock Market

The Bank of Queensland Ltd (ASX: BOQ) share price is in the green today, up 1.2%, alongside the S&P/ASX 200 Index (ASX: XJO), which is trading around 1% higher.

Could the ASX bank share be getting a boost on speculation of possible takeover action?

Potential BOQ takeover attempt?

In recent times, the market has seen ANZ Group Holdings Ltd (ASX: ANZ) launch a takeover effort to absorb the banking operations of Suncorp Group Ltd (ASX: SUN) to boost its Queensland presence and overall scale.

Federal treasurer Jim Chalmers recently gave ANZ the go-ahead for the takeover.

Meanwhile, multiple interested parties have considered the Bank of Queensland a potential takeover target, according to reporting by The Australian.

Those groups have reportedly not followed through (yet) after considering a possible deal.

Strategic review

A few months ago, the Queensland-focused ASX bank share launched a strategic review of the business.

The newspaper report suggested that the current BOQ share price was not compelling enough to enact a deal. Even so, those groups have still been considering the bank and its assets.

Some smaller banks, like BOQ, have difficulty trying to be as profitable as the major ASX bank shares.

Analysts’ views on how BOQ could increase profitability after its strategic review included suggestions to become smaller and more margin-focused. It could also pursue securitising its loans more aggressively, make loans without financing them, or sell some assets.

However, some of those options may not be viable or preferred for the ASX bank share.

How much profit is the bank expected to make?

While BOQ’s 2024 financial year is ongoing, the broker UBS forecasts the bank could generate a net profit after tax (NPAT) of $294 million. However, after that, UBS thinks BOQ’s net profit could steadily rise in each financial year between FY25 and FY28. Growing profit could be helpful for the BOQ share price.

Analysts at the broker forecast the BOQ net profit to grow 8.8% to $320 million in FY25 and to $406 million by FY28. If both forecasts are correct, that would be a rise of 38% between FY24 and FY28.

Regarding the potential dividend payment, the forecast on Commsec suggests a possible annual payout of 33 cents per share in FY24 and 34 cents per share in FY25. That would translate into forward grossed-up dividend yields of 7.5% and 7.75%, respectively.

The post BOQ share price rises amid rumoured takeover interest appeared first on The Motley Fool Australia.

More reading

• Here’s why BOQ shares could be on the verge of a turnaround
• Do ANZ shares offer the biggest dividend yield in the ASX bank sector?
• Is the fully franked 6.2% yield on Bank of Queensland shares for real right now?
• Can things get better for BOQ shares in FY25?
• ASX 200 bank shares ‘don’t appear overly expensive’ compared to global peers: UBS

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.

DroneShield Ltd (ASX: DRO) shares are taking another beating today.

In an unusual sell-off for the high-flying All Ordinaries Index (ASX: XAO) drone defence stock, shares closed down a precipitous 22.2% yesterday trading for $2.02 apiece.

That came on the heels of Monday’s 11.1% surge, which saw DroneShield shares surge to an all-time closing high of $2.60.

Today, the selling action continues, with the stock down 18.8% at $1.64 a share.

As the above chart shows (if you look closely), shares in the ASX drone defence company have been sold off for the past two days, sending them down 37%.

However, even after that big fall, shares remain up 335% so far in 2024.

Here’s what’s happening.

Why has the ASX drone defence come under pressure?

As Motley Fool analyst Sebastian Bowen reported, the big selldown in DroneShield shares appears to be driven by an article published before market open on Tuesday questioning the company’s high valuation.

The Capital Brief article noted that at Monday’s $2.60 a share, DroneShield commanded a market cap of $1.98 billion.

Rodney Forrest, director of Sublime Funds Management, was quoted as saying, “Its valuation is wild.”

DroneShield responded to an ASX price query, citing the article as the likely reason for the pressure on its shares.

The company noted that article included the following:

• Share price performance over the recent period
• Comparison of DRO’s market cap to several large companies across different industries in the Australian market
• Statements by two fund managers on their opinion of DRO’s valuation being overheated
• Statements from two stock analysts on their outlook for DRO
• A brief summary of DRO’s business
• Reference to DRO being a popularly traded stock on several broker platforms
• A historical sale of DRO’s shares held by one of DRO’s directors, Jethro Marks.

Management added, “There is no new information or change of circumstance around the business” that should impact DroneShield’s share performance.

Time to pounce on DroneShield shares?

To gauge the past two days of selling, it’s important to look at the bigger picture.

On Monday, when DroneShield shares closed at $2.60, the stock was up 863% over 12 months. Yep, a year ago, you could have bought shares for just 27 cents a pop.

Like Icarus, then, the drone defence stock may have flown too high, too fast.

Unlike Icarus, though, I don’t imagine the share price is going to plunge into the sea.

The negative market reaction appears more related to short-term opportunism to make a quick buck, shorting the stock rather than any longer-term fundamental retreat from the company’s strong growth prospects.

The rapid growth of potentially hostile drones is extremely unlikely to abate in the foreseeable future. And the AI revolution will only galvanize this trend. This means that the demand for rugged, effective counterdrone measures is also likely to keep growing apace.

This is a trend we’ve already seen playing out with recent growth metrics in DroneShield shares.

The company recently achieved record first-quarter revenues of $16.4 million, a 10-fold increase (900%) from the prior corresponding quarter.

At the end of April, DroneShield had a $27 million contracted backlog with a sales pipeline of more than $519 million.

So, is it time to pounce?

While shares could certainly still slide further from here over the near term, I believe that following the 37% two-day sell-down, long-term investors will likely look back at today’s $1.64 a share as a bargain entry point.

The post DroneShield shares dive another 19%! Time to pounce? appeared first on The Motley Fool Australia.

More reading

• Why Deep Yellow, DroneShield, Mount Gibson Iron, and Praemium shares are falling
• What’s next for Droneshield stock after Tuesday’s 22% drop
• Big ASX news! DroneShield share price crashes 31%
• Top 10 most traded ASX shares and US stocks in June
• Are ASX small-cap shares back in vogue amid a big shift?

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 positions in and has recommended DroneShield. 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.

Most of us would be aware that ASX shares have had an exceptional few days of trading on the Australian share market. We’ve seen a flurry of new all-time highs for the S&P/ASX 200 Index (ASX: XJO) in recent days. And we’ve also seen the Vanguard Australian Shares Index ETF (ASX: VAS) soar to some new records of its own.

The Vanguard Australian Shares ETF is the most popular and widely held index fund on the ASX. So news of its new all-time record high today will delight investors all around the country.

Yesterday, VAS units closed at $98.87 each. But this morning, those same units opened at $99.60 before rising up as high as $99.97 – tantalisingly close to that elusive $100 mark.

At the time of writing, the Vanguard Australian Shares ETF remains just a touch below that new high watermark, with this exchange-traded fund currently up 0.98% at $99.94.

We don’t have to look too far to understand why this ETF has just hit a new record today.

Why has the VAS ETF just hit a new ASX high?

The Vanguard Australian Shares ETF is an index fund, meaning it effectively mirrors a broader index. That index is not the S&P/ASX 200 Index (ASX: XJO), but rather the S&P/ASX 300 Index (ASX: XKO).

This index tracks the largest 300 stocks on the ASX by market capitalisation. It should come as no surprise to hear that this index has also reached a new record high today.

At present, the ASX 300 is up an eerily similar 1.02% at 8,015.8 points. That mark is also right on the ASX 300’s new record high.

So with the ASX 300 resetting its record today, it was inevitable that the Vanguard Australian Shares ETF followed suit.

The performance of their mutual underlying holdings has driven today’s new highs for both the ASX 300 and the ASX’s VAS ETF.

Take Commonwealth Bank of Australia (ASX: CBA), now the largest stock on the ASX 300 Index. It, too, hit a new record high of $133.50 a share this Wednesday. All four of the major ASX banks are now at multi-year highs.

BHP Group Ltd (ASX: BHP) isn’t having a great day, but CSL Ltd (ASX: CSL) is also just a touch off of its current 52-week high.

So it’s CSL and the four major banks that ASX investors can thank for the new Vanguard record.

This latest high caps off what has been a relatively successful year for this ASX ETF. VAS units are now sitting on a year-to-date gain of 6.04%, as well as a 10.4% rise over the past 12 months. Let’s now see if the Vanguard Australian Shares ETF can finally hit a three-digit unit price.

The post Here’s why the Vanguard Australian Shares Index ETF (VAS) just hit an all-time ASX high appeared first on The Motley Fool Australia.

More reading

• Top 10 most traded ASX ETFs in June
• 5 ways ASX shares investors define financial success
• Own the Vanguard Australian Shares Index ETF (VAS)? Here’s how much you’ll get paid today
• Should Aussies choose Vanguard Australian Shares Index ETF (VAS) or a term deposit for passive income?
• Buying shares and 5 other ways investors intend to spend tax cuts: report

Motley Fool contributor Sebastian Bowen has positions in CSL and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Commonwealth Bank of Australia (ASX: CBA) shares have been riding high over the past 12 months. During this time, the banking major’s stock price is up 31.5% trading at $133.5 per share at the time of writing.

This is a 20% advantage over the S&P/ASX 200 Index (ASX: XJO) over the past year. The chart below shows that the trend took off around November.

However, some brokers believe the good times for CBA shares may be nearing an end, projecting a sharp decline in market value. Let’s dive into the details.

Are CBA shares overvalued?

Despite touching record highs of $133.5 today, E&P Financial Group thinks the stock is now fully valued.

Analyst Azib Khan reiterated his negative sentiment on CBA shares, noting the company might be “priced for over-perfection”. According to The Australian, Kahn said:

While the Australian major banks are generally priced for perfection, CBA is priced for over-perfection.

While we do not expect anything untoward in the upcoming result (14 August) to trigger a de-rate – particularly if CBA opts to release credit loss provisions – we see business lending asset quality risks building on the horizon.

CBA currently trades on a price-to-earnings ratio (P/E) of 22.8 times, meaning investors are paying nearly $23 for every $1 of the bank’s earnings.

In comparison, the P/E ratio for the iShares Core S&P/ASX 200 ETF (ASX: IOZ), which tracks the benchmark index, is 18.7 times. CBA shares trade at a premium to the benchmark.

Another concern of Kahn’s is CBA’s lower dividend yield, which is “the only one below the cash rate” among the major banks.

The analyst set a target price of just $80 for CBA shares, implying an eye-watering 40% downside potential from the current price of $133.5.

What are other analysts saying?

It’s not just E&P that’s bearish on CBA shares. The consensus of analyst estimates rates it a sell, too, according to CommSec.

Bell Potter has a sell rating on CBA shares due to its high valuation relative to growth potential. According to my colleague Kate, the broker suggests investors consider taking profits. It cited limited growth prospects in a competitive banking sector.

L1 Capital also signalled CBA’s expensive valuation and lack of earnings growth in its June investment letter, indicating that the current price may not be justified by the fundamentals.

The bank’s reported net profit after tax (NPAT) of $5 billion was down 3% year over year in H1 FY24. Moreover, according to S&P Capital IQ, analysts expect earnings-per-share (EPS) to grow by just circa 1% per year from $5.76 to $5.91 by FY26.

Meanwhile, Goldman Sachs reiterated its sell thesis on CBA shares in a June note. Again, valuation was the cause for concern. Analysts at Goldman Sachs wrote:

We are Sell-rated on CBA given: While CBA’s volume momentum in housing lending has improved and BDDs charges remain benign, we don’t think this justifies the extent of CBA’s valuation premium to peers.

Foolish takeaway – what should investors do?

While CBA has delivered strong returns, its high valuation is raising concerns among the experts. Analysts from multiple firms suggest that CBA shares might be overvalued at current levels.

However, I’d point out that similar concerns were raised a year ago, and CBA still delivered substantial gains. Whether or not the fun is over depends on CBA’s fundamentals and the market’s overall sentiment.

Remember that past performance is never a predictor of future results, and conduct your own due diligence.

The post 40% downside! Broker values CBA shares at $80 — is the fun over? appeared first on The Motley Fool Australia.

More reading

• Westpac and the other big four bank shares are ‘due a correction’
• Is now the time to take some profits on CBA shares?
• Here’s the lithium price forecast through to 2027
• Prepare for earnings! What ASX bank share buyers can learn from Wells Fargo results?
• ASX 200 shatters record. Why it could still be ‘relatively cheap’ to invest

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 back on form on Wednesday and charging higher. In afternoon trade, the benchmark index is up 0.95% to 8,075.3 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are falling:

Deep Yellow Limited (ASX: DYL)

The Deep Yellow share price is down 4% to $1.37. This follows broad weakness in the uranium industry today which has offset the company’s presentation at a mining conference today. In respect to the latter, Deep Yellow has talked up its significant production capability. It notes that “once in production, Deep Yellow will be the largest pure-play uranium producer on the ASX [with] production capacity 7Mlb+ per annum. Management also highlights the “significant exploration upside with potential to develop large scale, long-life projects within the Deep Yellow portfolio.”

DroneShield Ltd (ASX: DRO)

The DroneShield share price is down 17% to $1.67. Investors have been selling this counter drone company’s shares after its incredible rally ran out of steam. While DroneShield is growing at a rapid rate, its market capitalisation had ballooned to approximately $2 billion. This was arguably well ahead of fundamentals and has led to a combination of profit taking and then panic selling from investors. And while there has been talk of short selling, the available data at present shows that short interest is still extremely minimal.

Mount Gibson Iron Ltd (ASX: MGX)

The Mount Gibson Iron share price is down 10% to 38.7 cents. This follows the release of the iron ore miner’s quarterly update. Mount Gibson reported iron ore sales of 0.9 million wet metric tonnes (wmt) for the June quarter at an average grade of 65.2%. This brought its total sales for the year to 4.1 million wmt at a grade of 65.3%. This was near the upper end of its annual guidance of 3.8 million wmt to 4.2 million wmt. However, its costs came in higher than expected and it is forecasting a sharp decline in iron ore sales volumes in FY 2025.

Praemium Ltd (ASX: PPS)

The Praemium share price is down 9.5% to 47 cents. Investors have been selling this investment platform provider’s shares following the release of its quarterly update. This is despite the company reporting a 30% increase in total funds under administration to $57.4 billion. Praemium’s CEO, Anthony Wamsteker, was pleased with the quarter. He said: “The strong growth in FUA on VMAAS highlights the tremendous potential of that service. Our non-custodial capability remains market leading and represents a significant opportunity for Praemium.”

The post Why Deep Yellow, DroneShield, Mount Gibson Iron, and Praemium shares are falling appeared first on The Motley Fool Australia.

More reading

• What’s next for Droneshield stock after Tuesday’s 22% drop
• Big ASX news! DroneShield share price crashes 31%
• Top 10 most traded ASX shares and US stocks in June
• Are ASX small-cap shares back in vogue amid a big shift?
• Here are the top 10 ASX 200 shares today

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 DroneShield and Praemium. 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.

A little-known ASX gold stock has made its shareholders very happy over the past eight trading days.

The company in question is Far East Gold Ltd (ASX: FEG), which has a current market cap of just $46 million.

Though that’s double what it was worth at the start of the month.

On 4 July, you could have bought shares in the junior ASX gold stock for 9.6 cents apiece. Earlier today, those same shares were changing hands for 20.5 cents, up 113.5%.

At the time of writing, shares are trading for 18 cents, up 5.9% in intraday trading.

Here’s what’s been spurring investor interest.

What’s sending the ASX gold stock soaring?

The Far East Gold share price certainly won’t have suffered from the surging gold price.

The yellow metal hit fresh all-time highs overnight, trading for US$2,474.5 per ounce. At the time of writing, that same ounce is fetching US$2,472.29. That sees the gold price up more than 20% so far in 2024 as investors up their bets of Federal Reserve interest rate cuts.

While that offers some nice support, the ASX gold stock got its supersized boost on Monday, 15 July.

That’s when the miner announced it had executed a Binding Term Sheet with PT Iriana Mutiara Idenburg to acquire up to 100% of the Idenburg gold project.

According to the release, Idenburg is an advanced, high-grade and highly prospective 95,280-hectare gold project, located in Indonesia’s Papua province.

Far East Gold noted that the same province hosts world-class multi-million-ounce gold and copper deposits. And Idenburg already benefits from more than US$25 million in historical exploration, including more than 5,500 meters of diamond drilling. Yet only 30% of the area has been explored in detail.

Commenting on the acquisition that saw the ASX gold stock soar 16.7% on Monday and gain another 21.4% on Tuesday, Far East Gold managing director Shane Menere said, “It is rare to find a project of such calibre with a substantial historical database of work completed by many of the world’s major gold miners.”

Menere added:

The main reason the project was not advanced further in the past was due to previous forestry classifications over the major prospect areas which restricted open cut mining. These restrictions have now been removed, paving the way for further development of this highly prospective project, which we know from previous exploration, has returned wide and high-grade gold intervals in multiple instances from surface…

We are very excited based on the extensive historical database of exploration work and many high-grade drill intercepts that demonstrate the potential for Idenburg to host a multi-million-ounce company maker’.”

With the past week’s share price surge, the ASX gold stock is back in the green for 2024, up 29%.

The post Have you heard of this ASX gold stock? It’s up 114% in 8 days! appeared first on The Motley Fool Australia.

More reading

• Why Deep Yellow, DroneShield, Mount Gibson Iron, and Praemium shares are falling
• Why Cettire, Core Lithium, Northern Star, and Step One shares are charging higher
• ASX 200 hits record high, UBS keeps end of year target steady
• Citi names these 3 ASX shares to buy now
• Zip shares frozen amid $267 million debt wipe plans

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 having a strong session today. At the time of writing, the benchmark index is up 0.9% to 8,071.4 points.

Four ASX shares that are rising more than most today are listed below. Here’s why they are charging higher:

Cettire Ltd (ASX: CTT)

The Cettire share price is up 4% to $1.56. This follows the release of additional financial metrics relating to the online luxury products retailer’s performance in FY 2024. Cettire advised that gross revenue is expected to be $975 million to $980 million, up 81% to 82% year on year. This was driven by a 6% to 7% increase in average order value and a 64% jump in active customers to 692,000. Cettire’s shares remain down over 30% since this time last month despite today’s gain.

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is up 9% to 12 cents. Investors have been buying this lithium miner’s shares following the release of its quarterly update. Core Lithium reported that it achieved record quarterly shipments of 33,027 dry metric tonnes (dmt) of spodumene concentrate during the three months ended 30 June. This was sold at an average price of US$1,078 per dmt, which is 16.5% higher than the prior quarter. However, all mining and processing activities are now suspended due to low lithium prices.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price is up 4% to $14.55. Investors have been buying Northern Star and other ASX gold stocks today after the price of gold surged to a record high overnight. Traders were bidding the precious metal higher after the market started to price in a 100% probability of an interest rate cut by the US Federal Reserve in September. The S&P/ASX All Ords Gold index is up 2.7% at the time of writing.

Step One Clothing Ltd (ASX: STP)

The Step One share price is up 17% to $1.71. This online underwear retailer’s shares are racing higher today after it released a trading update for FY 2024. Step One revealed that it has returned to form and expects to report revenue of $84 million for the year. This is up 29% on FY 2023’s revenue and 16.3% on what it recorded in FY 2022. Growing even quicker was the company’s earnings before interest, tax, depreciation, and amortisation (EBITDA). Management expects its EBITDA to increase by 42% year on year to $17 million.

The post Why Cettire, Core Lithium, Northern Star, and Step One shares are charging higher appeared first on The Motley Fool Australia.

More reading

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• ASX gold shares race higher after gold price hits record high
• 1 market-beating, dividend-paying ASX stock that’s a steal right now

The S&P/ASX 200 Index (ASX: XJO) is showing no signs of exhaustion in 2024, having nudged to a new all-time high in Tuesday’s session.

On July 15, the Australian benchmark index poked its head above the 8,000 mark for the first time in history. It now rests at 8,049 points just before lunch time today.

Despite the rush hour of gains, investment bank UBS has maintained its end-of-year target for the ASX 200 at 8,000 points.

This means the index would track sideways until yearend, if UBS is correct. Let’s take a look.

ASX 200 hits new highs

The ASX 200 soared to its second new record high this week, surpassing 8,000 points for the first time in history.

As my colleague Seb reported, it was a “momentous session” for Australian equities – and rightly so. The Aussie index has braved off inflation, higher interest rates, geopolitical risks, and whatever else to notch this milestone.

It has climbed over 18% since October last year when it was below 6,800 points. This surge has been driven by strong performances from key sectors, particularly financials and mining.

UBS’ take on the ASX 200

UBS strategist Richard Schellbach remains optimistic about the ASX 200, despite keeping an end-of-year target at 8,000 points on the benchmark.

Schellbach notes that the index is trading at a higher valuation multiple, yet the dividend yield remains comparable to historical levels. According to The Australian, he noted:

Right now the [price-to-earnings-ratio (P/E)] relative of Australian stocks versus global [stocks], sits roughly in the range they have maintained over the last two decades.

At 8000, the ASX200 sits on a richer than usual valuation multiple, whilst the current dividend yield still seems comparable to history…The weighting split between key sectors seen now does not indicate any huge shift within the composition of the equity market.

Schellbach also addresses concerns about market concentration. He asserts that the ASX market capitalisation hasn’t become overly concentrated among the biggest stocks.

The top 5, 10, and 20 companies hold similar market cap weights in the index as they did in 2000.

Given what happened in the year 2000 – the “tech bubble” bursting, resulting in one of the sharpest bear markets in history — I’m not sure if this is a good or bad omen. Time will tell.

Future outlook

UBS says the ASX 200 is trading on the expensive side compared to historical averages. But, it notes this trend is consistent with global equity markets.

When adjusting for long-term market cycles, using a ratio called the “cyclical adjusted PE ratio” or “CAPE”, it says there are no signs of an “earnings bubble.”

Schellbach acknowledges that the period of “peak margins” is over, but Australian companies aren’t “overlearning” based on their return on equity (ROE).

Takeout

The ASX 200’s record high is a testament to the resilience of the Australian economy at large. UBS’ steady end-of-year target is interesting. Whilst it is flat on today’s index value, it also implies no downside either.

Despite this, valuations do matter, and past performance is no guarantee of future results. It’s critical to consider your own personal risk tolerances.

The post ASX 200 hits record high, UBS keeps end of year target steady appeared first on The Motley Fool Australia.

More reading

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• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Tuesday
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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 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.

Now that the new financial year is in full swing, ASX shares continue their ascent, with the S&P/ASX 200 Index (ASX: XJO) marching to new all-time highs on Tuesday.

Brokers are in full swing too. Citi has rated three ASX shares as buys in various reports to clients this week.

Here’s a closer look at what the broker said and what it could mean for investors.

Nickel Industries Ltd (ASX: NIC)

Nickel Industries is the first stock Citi upgraded to a buy this week. Analyst Kate McCutcheon noted the nickel player’s share price dropped 14% over the past 10 weeks, creating an attractive entry point.

The analyst sees positive earnings per share (EPS) growth from consensus upgrades and believes the company’s H1 FY24 earnings before interest, tax, depreciation and amortisation (EBITDA) trough is “now cleansed”, according to The Australian.

The ENC HPAL project, in which it owns 55%, is also ahead of schedule. First production is expected in the third quarter of CY25. McCutcheon says that most consensus estimates haven’t yet factored in ENC to the company’s pre-tax earnings.

Citi also believes the market’s cost expectations for NIC’s newer rotary kiln-electric-furnace (RKEF) projects, Oracle Nicke (ONI) and Angel Nickel (ANI), are too high.

NIC is a bottom quartile producer and has demonstrated profitability through cycle with committed production growth to capture pricing upside.

With nickel sub 17,000 a tonne, nickel production cuts, should support sentiment/price. NIC is now the only pure-play nickel producer left on the ASX.

Citi has set a target price of $1.05 for the ASX share. Bell Potter also rates the stock a buy with a $1.54 price target.

These targets represent an upside potential of 22% and 78% from the current price of 80.6 cents per share, respectively.

CAR Group Ltd (ASX: CAR)

Citi sees significant potential in CAR Group. The broker upgraded its rating to buy and increased its target price on the ASX share to $39.80.

At the time of writing, stock in CAR Group —formerly known as Carsales.com — is fetching $35.70 apiece, up nearly 15% this year to date.

Analyst SIraj Ahmed said the bank expects double-digit earnings growth from CAR over the medium term.

Ahmed projects that FY24 earnings per share (EPS) growth should accelerate to 17% from 13.2% in FY23. CAR’s international business, particularly in Brazil and the US, should benefit from rate cuts, he also noted.

While another RBA rate rise and weakening demand are risks to the Australian business, we see Car Group having a very strong position and expect it to deliver solid growth even in a tough environment.

Potential bolt-on mergers and acquisitions (M&A) could further boost growth, especially in the US, Ahmed says.

Citi values the ASX share at $39.80 apiece, implying an 11.7% upside from the current price.

BlueScope Steel Ltd (ASX: BSL)

Citi’s Paul McTaggart also upgraded BlueScope Steel to buy from the firm’s previous neutral rating.

He expects US steel prices have hit their lows and will rise post-Northern summer. McTaggart also noted that US monetary conditions are set to turn expansionary, which could benefit BlueScope.

We think US steel prices are now near their lows with a post Northern summer uptick expected and with US monetary conditions set to turn expansionary.

We trim our target price to $23.70 from $24 but raise our rating to Buy as we look through near term earnings weakness and likely consensus earnings downgrades.

Despite trimming FY25 earnings before interest and tax (EBIT) to $1.11 billion due to falling export spreads, Citi sees EBIT lifting to $1.73 billion by FY27.

Shares in the ASX mining stock are currently swapping hands at $21.41 apiece, meaning Citi’s price target implies around 11% upside potential.

ASX shares Foolish takeout

Citi’s positive outlook on Nickel Industries, CAR Group, and BlueScope Steel suggests it sees strong growth potential in each of these ASX shares.

Investors looking to diversify their portfolios with promising ASX stocks may find these upgrades compelling. As always, consider your investment goals and risk tolerance before making any decisions.

The post Citi names these 3 ASX shares to buy now appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Car Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Zip Co Ltd (ASX: ZIP) shares are motionless this morning despite releasing a fourth-quarter update.

Whether you want to buy or sell, a trading halt prevents shareholders from doing either this morning. The need to hit pause on the company’s share price stems from another announcement released alongside Zip’s quarterly figures.

In addition to the buy now, pay later provider’s results, Zip has unveiled a capital raise. Not to make an acquisition or fund an expansion. No… Zip is rattling the tin to retire its existing corporate debt facility early.

Debt demolition with Zip shares

It appears that management hopes to tap into the enthusiasm following a sensational 273% ascension in the Zip share price over the past year.

Now valued at a market capitalisation of $1.8 billion, the company proposes raising roughly 15% of that by selling new shares in two parts.

The first part is a fully underwritten equity placement for $217 million. The second is a non-underwritten share purchase plan for eligible shareholders that will seek to raise a further $50 million, amassing a grand total of $267 million before costs if all goes to plan.

Shares will be issued at the higher option between $1.52 per share or ‘the price determined by a bookbuild process to be undertaken in respect of the placement’. Zip shares last traded at $1.605, meaning the $1.52 would represent a 5.3% discount.

According to Zip, the transaction will strengthen its balance sheet and reset its capital structure. Furthermore, paying down hundreds of millions worth of debt will provide flexibility and liquidity to ‘pursue further growth’.

The corporate debt facility has a limit of $150 million, and Zip had drawn down $130 million of it as of 30 June 2024. The debt’s maturity is set for December 2027, more than three years away.

What about the fourth-quarter results?

Defying the high interest rate environment, Zip achieved growth in the fourth quarter ended 30 June 2024. Financial accomplishments during the quarter include:

• Transaction volume up 19% year-on-year to $2.6 billion
• Revenue up 22.1% to $223.6 million
• Monthly transacting users up 6.1% to 2.1 million

As usual, most of Zip’s revenue growth came from the United States, increasing 46.8% to $121.5 million. For comparison, the Australia and New Zealand region only grew 1.8% to $102.1 million. Similar differences in growth were apparent for transaction volume and number of transactions.

Conversely, Zip saw its number of active customers slip in both regions. Consequently, total active customers decreased by 2.9% to 6 million.

Additionally, bad debts rose to 4.7% of Australian consumer receivables in Q4 — its second-highest level since June 2022. Despite this, cash earnings before tax, depreciation, and amortisation for FY24 are expected to be between $67 million and $70 million.

Zip held $353 million in total cash on its balance sheet at the end of June.

Zip shares are up 159% since the start of the year.

The post Zip shares frozen amid $267 million debt wipe plans appeared first on The Motley Fool Australia.

More reading

• Zip shares fall despite return to ASX 200 index
• 5 things to watch on the ASX 200 on Monday
• Are ASX small-cap shares back in vogue amid a big shift?
• Is it too late to buy Zip shares at their 2-year highs?
• 3 ASX small-cap shares that soared 250% to 675% in FY24

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Zip Co. 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.