Category: Stock Market

Looking for the best S&P/ASX 200 Index (ASX: XJO) stocks to ride the artificial intelligence (AI) megatrend?

You’re not alone!

The meteoric rise of generative AI stock Nvidia Corporation (NASDAQ: NVDA) has seen the US-listed company’s market cap surge to US$2.3 trillion (AU$3.4 trillion).

That’s more than Australia’s annual GDP!

And it’s drawn plenty of investor interest.

So, which two ASX 200 stocks look best placed for revenue and profit growth from this booming market?

Read on.

Two ASX 200 stocks for the AI revolution

The massive recent growth and even more massive future growth potential that AI presents for ASX 200 stocks hasn’t been lost on Jun Bei Liu, a lead portfolio manager at Tribeca Investment Partners.

“We believe AI will be a mega investment trend that permeates every part of human life via business and household adoption,” Liu says (courtesy of The Australian Financial Review).

But with stocks like Nvidia already up 197% in 12 months, could the sector be getting a bit frothy? And might that not impact ASX 200 stocks connected to the industry?

Not according to Liu.

“We strongly disagree with the notion that the performance and weight of AI-related tech stocks is a signal that we are in a bubble,” she says.

Liu explains that demand for Nvidia’s generative AI chips is “projected to double again in the next six years”.

Importantly for Aussie investors, she says this will only increase the already booming demand for data storage and data centres. Already growing at double-digit rates, data centre capacity requirements are forecast to grow at 15% annually through to 2030.

She adds that, “Australia, which is already a top five global data centre hub, is forecast to grow from 1 [gigawatt] GW today to more than 2.5GW during this time.”

As for which ASX 200 stocks are best positioned to make hay from this mega investment trend, Liu notes that there are numerous different opportunities to tap into this “broad investment theme”.

She says the opportunities for AI “are in chips – used to power the process; storage – needed to house the enormous amounts of data processed; energy – used to power the infrastructure; and software – used to execute computer processes”.

Drilling down to the domestic market, Liu says (courtesy of The AFR):

For Australian investors who wish to play this theme on the ASX, storage is probably the easiest and most relevant given we don’t manufacture chips, energy tends to be localised and software developers and creators tend to be global…

Key components of a successful data centre include access to the grid, security of energy, connectivity and proximity to clients. With limited access to usable land that provides such access and long-term contracts for energy security, it is the incumbent data centre players that will continue to drive future growth.

Which brings us to the two “best” ASX 200 stocks to buy now for the AI revolution: real estate investment trust (REIT) Goodman Group (ASX: GMG) and data centre operator NextDc Ltd (ASX: NXT).

According to Liu:

The best listed players that we believe directly participate in this megatrend here in Australia are NextDc and Goodman Group – both have a strong pipeline of future contracted development…

In the case of Goodman Group, not only does it directly tap into the global data centre trend, it also has the opportunity to change much of its future data centre pipeline into a direct operating model where returns can be multiple folds of current development earnings.

The Goodman share price is up 69% over the past 12 months.

ASX 200 stock NextDc’s shares are up 50% over this same period.

The post These are the 2 ‘best’ ASX 200 stocks to buy now for the AI megatrend: expert appeared first on The Motley Fool Australia.

More reading

• 2 highly rated ASX growth shares to buy before it’s too late
• 5 stellar ASX growth shares to buy for strong returns
• Up 73% in a year, this surging ASX 200 stock just hit another all-time high
• These ASX 200 blue chip shares could rise 10% to 30%
• What are 3 of the safest ASX 200 tech shares in Australia right now?

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

Pointsbet Holdings Ltd (ASX: PBH) shares were on fire on Monday.

In response to the release of a guidance update, the ASX tech stock rose 10% to end the day at 50 cents.

The good news is that one leading broker believes the sports betting company’s shares are still undervalued despite this gain.

As a result, it is recommending Pointsbet shares as a buy right now.

Why is this an ASX tech stock to buy?

According to a note out of Bell Potter, its analysts have responded to the update by retaining their buy rating and 63 cents price target on the company’s shares.

Based on its current share price, this implies potential upside of 26% for investors over the next 12 months.

To put that into context, a $10,000 investment would turn into $12,600 if Bell Potter is on the money with its recommendation.

Commenting on the update, the broker said:

PointsBet upgraded its FY24 normalised EBITDA guidance from a loss of $(9-14)m to a loss of $(4-6)m (vs BPe loss of $(9.9)m). The company attributed the upgrade to “continued strong year-to-date trading in H2 FY24 and increased operational efficiency and productivity.” The upgraded result reflects a significant improvement on the FY23 normalised EBITDA loss of $(49.0)m for the continuing operations (i.e. Australia and Canada). There was no mention of or change in the FY25 guidance of positive group EBITDA and we expect this is unchanged. CEO Sam Swanell said “we continue to invest for further growth, in particular our core technology and product capabilities and … this is driving our market share growth and setting the Company up for further success in FY25 and beyond.”

Why should you invest?

Overall, the broker believes the market is undervaluing the company on a sum of the parts basis. It also sees the ASX tech stock as a potential takeover target, especially given the recent simplification of its operations. It said:

We determine our price target for PointsBet through a sum-of-the-parts (SOTP) and there is no change in the $0.63 valuation. The components of this valuation are $150m for the Australian business ($0.46/share), $25m for the Canadian business ($0.08/share) and $30m in corporate cash ($0.09/share). We note we ascribe no value for the Banach technology which PointsBet can continue to use for in-play betting in Canada and, to a lesser extent, Australia. We also believe PointsBet is a potential takeover target given its market position (fifth largest in Australia), simplified structure (Australia and Canada), proprietary technology and good Balance Sheet.

The post Buy this ASX tech stock for a 26% return appeared first on The Motley Fool Australia.

More reading

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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 PointsBet. 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.

Wesfarmers Ltd (ASX: WES) shares have had a cracking year so far in 2024. As can be seen on the chart below, the consumer stock has surged by around 20% year to date. By comparison, the ASX 200 has gained a much more modest 3.6%.

But where is the Wesfarmers share price heading next?

Wesfarmers may not be a household name outside of investing circles, but the businesses it owns certainly are! The company operates some of the most high-profile and well-regarded retailers in Australia including Kmart, Bunnings, Target, Priceline, and Officeworks.

Overall, Wesfarmers’ businesses have been performing well, despite the current backdrop of sticky inflation and the surging cost of living. In particular, Kmart and Bunnings have managed to keep growing sales because of their focus on providing good-value products.

With Wesfarmers shares currently trading at the upper end of their 52-week range, let’s take a look at what brokers think.

Price targets on Wesfarmers shares

A share price target is the value analysts think the stock could be trading at in 12 months.

In a note released early this month, top broker UBS stated a price target of $66 on Wesfarmers shares, implying the stock could fall by more than 3% from where it’s currently trading.

UBS has a neutral rating on the ASX 200 retail share, meaning it doesn’t believe the business is worth buying or selling at this stage. Despite the neutral rating, UBS says there are attractive growth options across Bunnings, Kmart, and Officeworks for Wesfarmers.

Looking at Bunnings, the broker highlights “new and expanded product ranges (eg. pet, rural, auto), improving use of retail space, improved omni-channel customer experience, improved commercial offering” and an improved supply chain as growth drivers. UBS also says there are external “supports” for Bunnings, including population growth and the age and supply of housing (compared to the strong demand).

Regarding Wesfarmers’ other major profit generator, Kmart, UBS points to the fact the business is leveraging growth as customers “seek value via greater frequency and category participation”.

The range of products from Kmart-owned brand Anko is also seeing benefits from increased scale, enabling better products at lower prices. According to UBS, a broadening of existing Kmart ranges can “recruit” more customers, while Anko’s international wholesale and retail (small format) growth provides “long-term optionality”.

According to Commsec, broker Goldman Sachs is also neutral on Wesfarmers shares, though its price target is more optimistic than UBS’s. Goldman maintains a price target of $68.80, 4% higher than the UBS price target and 0.85% higher than the current Wesfarmers share price.

Foolish takeaway

Based on Wesfarmers’ current valuation, price targets from UBS and Goldman Sachs are not suggesting a huge rise for the ASX 200 consumer stock over the next 12 months.

Looking further afield at analyst opinions collated by Commsec on the retail giant, there are currently 17 ratings. Of those 17, five are sells, ten are holds, and two are buys.

So while Wesfarmers may be able to keep growing earnings, it’s clear some analysts don’t think the Wesfarmers share price has much more to rise in the shorter term.

The post What is the price target for Wesfarmers shares? appeared first on The Motley Fool Australia.

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• Inherited a substantial sum of money? Here’s how I’d spend it (including the ASX stocks I’d buy)

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

If you are searching for some ASX dividend shares to buy then it could be worth checking out the two listed below.

Both have been named on Morgans’ best ideas list again this month and tipped to provide attractive dividend yields in the near term. Here’s what you need to know:

HomeCo Daily Needs REIT (ASX: HDN)

The first ASX dividend share that analysts at Morgans are positive on right now is HomeCo Daily Needs. The broker currently has an add rating and $1.37 price target on the neighbourhood retail and large format retail focused property company’s shares.

Morgans is very positive on HomeCo Daily Needs’ outlook thanks to favourable trends and its resilient tenants. It said:

HDN’s $4.7bn portfolio is focused on daily needs assets (Large Format Retail; Neighbourhood; and Health & Services) across +50 properties with the top 3 tenants Bunnings, Coles and Woolworths. 70% of leases are fixed; 21% linked to CPI; and 9% based on supermarket turnover. The portfolio has resilient cashflows and continues to be a beneficiary of accelerating click & collect trends. +80% of tenants are national and ~75% of tenants offer click & collect reinforcing the importance of assets being able to support ‘last mile logistics’. Sites are also in strategic locations with strong population growth (+80% metro). HDN offers an attractive distribution yield and the development pipeline provides growth opportunities.

As for dividends, Morgans expects dividends per share of 8 cents in FY 2024 and then 9 cents in FY 2025. Based on the current HomeCo Daily Needs share price of $1.26, this will mean yields of 6.3% and 7.1%, respectively.

QBE Insurance Group Ltd (ASX: QBE)

Another ASX dividend share that Morgans is bullish on right now is QBE. It has an add rating and $20.00 price target on the insurance giant’s shares.

The broker believes the company’s valuation is cheap based on its positive outlook. It said:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on 8x FY24F PE.

In respect to income, Morgans expects the company to pay dividends per share of 99 cents in FY 2024 and then 108 cents in FY 2025. Based on the current QBE share price of $17.68, this will mean yields of 5.6% and 6.1%, respectively.

The post Morgans says these ASX dividend shares are top buys appeared first on The Motley Fool Australia.

More reading

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• 5 things to watch on the ASX 200 on Monday

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 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.

On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week with a strong gain. The benchmark index rose 0.6% to 7,863.7 points.

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

ASX 200 expected to edge lower

The Australian share market looks set to edge lower on Tuesday following a mixed start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 7 points or 0.1% lower. In late trade in the United States, the Dow Jones is down 0.45%, but the S&P 500 is up 0.15% and the NASDAQ is up 0.65%.

TechnologyOne results

The TechnologyOne Ltd (ASX: TNE) share price will be one to watch on Tuesday. That’s because the enterprise software provider is scheduled to release its half year results. Goldman Sachs is expecting a strong performance from the tech stock. It said: “We estimate TNE will report (1) SaaS ARR [annual recurring revenue] of A$425mn or +35% y/y vs +34% Visible Alpha Consensus Data; (2) Total revenue of A$241mn or +19% y/y vs A$231mn consensus; (3) Profit before tax of A$62mn or +18% y/y vs +19% consensus.”

Oil prices soften

It could be a subdued session for ASX 200 energy shares Santos Ltd (ASX: STO) and Karoon Energy Ltd (ASX: KAR) after oil prices softened overnight. According to Bloomberg, the WTI crude oil price is down 0.35% to US$79.77 a barrel and the Brent crude oil price is down 0.3% to US$83.73 a barrel. Uncertainty over Iranian supply plans weighed on prices.

Elders rated as a buy

The Elders Ltd (ASX: ELD) share price is good value according to analysts at Bell Potter. In response to the agribusiness company’s half year results, the broker has reaffirmed its buy rating with an improved price target of $9.30. Bell Potter believes its shares are undervalued at current levels. It said: “We see ELD trading at 7.5-8.0x Through-The-Cycle (TTC) EBITDA, which we have raised to $270-280m reflecting YTD business investment ($68m in 1H24 + $51m on Knight Frank TAS), a discount to its historical average of 8.5x.”

Gold price jumps to record high

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a good session on Tuesday after the gold price raced to a new record high overnight. According to CNBC, the spot gold price is up 0.8% to US$2,436.9 an ounce. This was driven by a perfect storm of U.S. rate cut expectations, China’s stimulus measures, and geopolitical tensions lifting demand.

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

More reading

• Down 16% in 6 weeks: Is this ASX 200 share a bargain buy?
• Here are the top 10 ASX 200 shares today
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• 2 of the best ASX mining stocks to buy now

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

On Monday, the Elders Ltd (ASX: ELD) share price pushed higher after investors responded positively to the agribusiness company’s half year results.

The ASX 200 share ended the day over 1% higher at $8.30.

While this is positive, it doesn’t change much on a six-week basis, with Elders’ shares still down approximately 16% over this period.

Is this recent share price weakness a buying opportunity for investors or should they keep their powder dry? Let’s see what analysts at Bell Potter are saying about the company.

Is this ASX 200 share good value?

According to a note released this morning, the broker was a touch disappointed with Elders’ performance during the first half.

Although the broker was expecting a sizeable profit decline, it was still short of expectations. Bell Potter commented:

Operating revenue of $1,365m was down -18% YOY (vs. BPe $1,365m). EBIT of $38.5m was down -54 % YOY (vs. BPe of $44.1m), with a higher-than-expected contribution from retail being offset in large by a weaker Wholesale result. Underlying NPAT of $14.4m was down -71% YOY (vs. BPe of $19.8m) and reflected a materially higher YOY interest charge (reflecting a +$118m YOY uplift in average working capital balances and higher base rates).

This has led to the broker trimming its earnings forecasts for the ASX 200 share for the coming years. It adds:

Our NPAT forecasts are downgraded -5% in FY24e, -3% in FY25e and -3% in FY26e, largely reflecting higher financing and depreciation charges (lease + capex).

Staying buy-rated

However, despite Elders’ underperformance, Bell Potter remains very positive on the company and has even increased its valuation for its shares.

According to the note, the broker has retained its buy rating with an improved price target of $9.30 (from $9.10). This implies potential upside of 12% for investors from current levels.

In addition, the broker is forecasting some attractive dividend yields this year and in the future. It has pencilled in yields of 4.3% in FY 2024, then 4.9% in FY 2025, and then 5.2% in FY 2026.

Overall, Bell Potter appears to believe that the ASX 200 share is undervalued based on historical multiples and its through the cycle earnings estimates (which have been boosted following the result). It explains:

We see ELD trading at 7.5-8.0x Through-The-Cycle (TTC) EBITDA, which we have raised to $270-280m reflecting YTD business investment ($68m in 1H24 + $51m on Knight Frank TAS), a discount to its historical average of 8.5x.

The post Down 16% in 6 weeks: Is this ASX 200 share a bargain buy? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why is this ASX All Ords stock staying strong as profits crash 76%
• 5 things to watch on the ASX 200 on Monday

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

Many investors own ASX dividend shares with the aim of receiving passive income. These types of stocks pay out dividends (usually twice yearly but sometimes monthly) after generating profit from their operations.

There are several different dividend strategies investors can adopt. Some may focus on high-yield stocks, others may like dividend-paying stocks from resilient industries, and some may prefer businesses that are growing their payouts at a fast rate but currently have a relatively low dividend yield.

But there’s also another compelling way to earn income from shares that doesn’t involve dividends, as recently highlighted by the sister of investing legend Warren Buffett.

Bertie Buffett has revealed a great strategy to create the income she needs from her ownership of Berkshire Hathaway shares. Her method can be used by anyone with a sizeable investment balance without needing to receive dividends from their own shares.

Berkshire Hathaway is a huge, listed US business that invests in other shares and also operates many private businesses. Warren Buffett, one of the world’s greatest-ever investors, has led Berkshire Hathaway for decades, helping it become the American powerhouse it is today.

As well as being Warren Buffett’s sister, Bertie Buffett is a long-time shareholder of Berkshire Hathaway. She’s also front and centre in Warren Buffett’s mind when he writes his annual shareholder letter.

Berkshire Hathaway famously doesn’t pay dividends, so let’s look at how Bertie is generating cash flow through her ownership of the company’s shares.

How Buffett’s sister generates passive income

Bertie Buffett recently spoke to CNBC’s Becky Quick. Bertie used to expect dividends from her investment portfolio, but changed her mind after receiving some advice from her famous brother.

Warren Buffett suggested Bertie simply sell a portion of her shares to unlock the cash flow she needs.

I’ll give you an example of how this could work. Imagine Bertie owned $100,000 of Berkshire Hathaway. If the Berkshire Hathaway share price gained 10% in a year, it would then be worth $110,000. Bertie could sell $4,000 worth of shares and achieve a 4% ‘dividend yield’ on her original $100,000.

Of course, Bertie might be unlocking $100,000 of passive income at a time rather than $4,000! What are some of the attractions of this method? Bertie explained in the CNBC interview:

…I can decide when I declare a dividend, I can declare one for myself you know in essence by selling some stock and I can choose when I’m going to do it and choose how much it is. And it’s capital gains instead of regular income tax and that’s good.

How to apply this to ASX shares

We can utilise this strategy ourselves to sell ASX growth shares and unlock passive income cash flow.

Of course, one would need a sizeable amount invested to make the capital growth and sale worthwhile.

If someone owned $1,000 worth of shares, for example, it wouldn’t make much sense to sell $50 worth (a 5% dividend yield) — that’s not a lot of passive income for the brokerage cost and effort of reporting the sale to the ATO.

In my opinion, one of the key advantages to Bertie utilising this strategy with her Berkshire Hathaway shares is the fact the US company has a diversified portfolio which steadily changes over time to ensure it’s future-focused (such as its investment in Apple).

For the most effective ‘Bertie Buffett’ strategy, I’d want to choose a well-diversified exchange-traded fund (ETF) that can deliver good capital growth and owns strong businesses with decent fundamentals.

Some of the leading ASX ETFs I’d choose for this strategy include the VanEck MSCI International Quality ETF (ASX: QUAL), Betashares Global Quality Leaders ETF (ASX: QLTY), VanEck Morningstar Wide Moat ETF (ASX: MOAT), and the BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

The post Warren Buffett’s sister uses this simple method for passive income without dividends appeared first on The Motley Fool Australia.

More reading

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• The secret stock Warren Buffett just spent $10 billion on (and finding similar ASX shares)
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Berkshire Hathaway. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, and VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

More reading

• Why did this ASX 200 mining stock jump 7%?
• Why Gentrack, New Hope, Nuix, and Star Entertainment shares are charging higher
• Are Star shares now rolling the dice on a rescue bid?
• 5 things to watch on the ASX 200 on Monday
• 2 of the best ASX mining stocks to buy now

Motley Fool contributor Sebastian Bowen has positions in Newmont. 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 Nuix Ltd (ASX: NXL) share price is rising from the ashes as it trots towards 4 years as an ASX-listed company.

As the trading ceases for another day, shares in the investigative analytics software provider rest at $2.98, up 25.21% from Friday’s closing price. The rapid rise makes Nuix’s monthly return look outlandish, sitting at a smitten 53%. It would’ve taken the last 4 years and 19 days to get the same return from the S&P/ASX All Ordinaries Index (ASX: XAO) before dividends.

Zoom out, and the returns from holding Nuix quickly become astronomical. For example, the one-year return from this Sydney-based tech company is 195% as of Monday afternoon. Yes, that’s the equivalent of turning $5,000 into $14,750 in 12 months.

It sparks the question: Why the sudden shift in gears after what was a disastrous time?

What’s behind the resurgence?

There’s no way of pinpointing what flipped the switch to put Nuix shares on a positive trajectory. However, we can see which announcements were followed by significant company share price increases. This should give us an insight into some of the driving forces behind the change in investor sentiment.

A quick glance at a one-year price chart shows 20 July 2023 as the first major upward move, as shown below.

On 20 July 2023, Nuix released its FY23 preliminary results. A few important pieces of information were contained in this announcement:

• Nuix was returning to growth, forecasting $184 million to $186 million in annualised contract value
• Legal costs were on the downtrend, and
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) were expected to rise

Fast forward to the present day, and it’s a similar situation presented in today’s FY24 earnings update. Nuix expects to exceed its 10% revenue growth target for the full financial year, and statutory EBITDA is anticipated to land between $47 million and $52 million — increasing more than 35% from FY23.

Part of the rosy forecast originates from Nuix bagging a ‘significant multi-year deal’ with an unnamed customer.

Still hanging over Nuix shares

It would be remiss to gloss over the anchors still shackled to the metaphorical ankles of Nuix.

While the Nuix share price has performed exceptionally recently, it has still underperformed the benchmark since its hyped initial public offering (IPO). From its listing, the ASX tech share is down approximately 63%, whereas the All Ordinaries Index is up about 19%.

Lastly, the high-flyer remains subject to a decision on allegations of misleading the market made by the Australian Securities and Investment Commission (ASIC). Without knowing the verdict, the pending outcome presents a risk.

The post Up 53% in a month, how Nuix shares are winning back investors appeared first on The Motley Fool Australia.

More reading

• Why Gentrack, New Hope, Nuix, and Star Entertainment shares are charging higher

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 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.

It was a good start to the week for the New Hope Corporation Ltd (ASX: NHC) share price.

The ASX 200 mining stock was up over 7% to $5.05 at one stage before closing the session at $4.95.

Why were investors buying this ASX 200 mining stock?

The catalyst for this strong gain was the release of the coal miner’s quarterly update, which revealed strong production and earnings growth.

According to the release, for the three months ended 30 April, New Hope delivered a 28% quarter on quarter increase in ROM coal production to 3,665,000 tonnes. This reflects a 23% increase in Bengalla production to 2,955,000 tonnes and 55% jump in New Acland production to 710,000 tonnes.

Also increasing strongly were the ASX 200 mining stock’s sales volumes. New Hope reported a 21% quarter on quarter increase in coal sold to 2,358,000 tonnes. This was achieved with an average realised sales price of $179.78 per tonne, which was flat on the previous quarter.

And with the Bengalla Mine achieving an FOB cash cost (excluding state royalties) of $73.4 per sales tonne for the quarter, which is a 7.8% reduction, New Hope’s underlying EBITDA increased by a sizeable 21.6% quarter on quarter to $218.8 million.

This ultimately led to the ASX 200 mining stock ending the period with a cash balance of $381.3 million. This is post-payment of the interim fully franked dividend of $143.7 million and Malabar equity raise commitment of $79.7 million.

Should you invest?

The team at Goldman Sachs doesn’t appear to believe that investors should be buying this ASX 200 mining stock right now.

While the broker has not yet responded to this update, so its recommendation could yet change, it currently has a sell rating and $3.50 price target on its shares. This implies significant downside potential of almost 30%.

Goldman believes that its shares are overvalued at current levels compared to peers. It explains:

The stock is trading at ~1.3x NAV (A$3.58/sh) and discounting a long-run thermal coal price of ~US$95/t (real) vs. our US$83/t estimate (based on our view of long run global marginal costs). NHC is also trading on a NTM EBITDA multiple of ~4.5x vs. global coal peers on ~3.0x. We note that FCF yield is -4%/11% in FY24/25 on our ~US$140/115/t thermal coal price assumptions, and -4%/18% at spot thermal (both include benefits from hedging).

Thermal Coal market to soften further in 2024: our global commodity team forecasts a ~40Mt surplus for 2024 due to decreasing global import demand, largely driven by a weakening in China hoarding demand (-80Mt) and high inventory levels, and growing export capacity (+47Mt) from Indonesia, Australia and Russia and we expect marginal costs to fall to US$100/t in 2024. We forecast US$130/t for 6000kcal NEWC benchmark in 2024.

The post Why did this ASX 200 mining stock jump 7%? 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. 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.