Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

ANZ Group Holdings Ltd (ASX: ANZ)

According to a note out of Citi, its analysts have retained their buy rating and $29.25 price target on this banking giant’s shares. While the broker is positive on the banking sector, it is particularly positive on ANZ’s outlook. So much so, the broker has made the bank its new top pick in the sector. Citi notes that this has been driven by the re-emergence of key structural tailwinds in the key Institutional division. The ANZ share price is fetching $23.89 on Wednesday.

Calix Ltd (ASX: CXL)

A note out of Bell Potter reveals that its analysts have retained their speculative buy rating and $9.00 price target on this environmental technology company’s shares. The broker believes 2023 will be another catalyst-rich and important year for Calix. The broker also highlights the company’s growing suite of applications which target global challenges, including decarbonisation of hard-to-abate industrial processes. The Calix share price is trading at $4.88 this afternoon.

Pilbara Minerals Ltd (ASX: PLS)

Another note out of Citi reveals that its analysts have upgraded this lithium miner’s shares to a buy rating with a $4.70 price target. The broker made the move on valuation grounds after a significant pullback since November. The broker believes this correction is overdone, particularly given its belief that spot spodumene prices may hold at +US$7000 per tonne for longer than the market expects. The Pilbara Minerals share price is fetching $4.01 today.

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

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More reading

• 3 ASX 200 lithium shares brokers just upgraded to ‘buy’
• Why Allkem, Pilbara Minerals, Talga, and Westgold shares are storming higher today
• Will 2023 be a golden year for ASX 200 mining shares?
• ‘Correction is overdone’: broker upgrades Pilbara Minerals shares to buy
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

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

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The S&P/ASX 200 Index (ASX: XJO) is having a rather cracking Wednesday so far this session. At the time of writing, the ASX 200 has lifted by 0.97% to just over 7,200 points. But the BHP Group Ltd (ASX: BHP) is faring even better.

BHP shares are on fire today. The ASX’s largest company is up a pleasing 2.18% to $48.84 a share at present. This leaves the mining giant at a 7.74% year-to-date gain in 2023 thus far. Not bad at all considering we are only 11 days into the new year.

Not only that, BHP shares hit a new high of $49.93 this afternoon. Not only is that a new 52-week high for the BHP share price, but it is also a new, all-time, record high for the Big Australian. That’s a pretty big deal, considering BHP has been around for more than 170 years.

So what has lifted ASX investors’ sentiments on BHP shares so dramatically this Wednesday?

Well, in all likelihood, it appears that a sharp increase in BHP’s primary commodity – iron ore – is mostly responsible for these gains.

Iron ore up, dollar down: Why BHP shares just hit a new record high

As my Fool colleague James reported this morning, iron ore has just rocketed a healthy 3.1% higher to US$121.95 per tonne, amid “hopes that China’s reopening will lead to an increase in demand for the base metal”.

BHP is one of the world’s lowest-cost iron ore miners. As such, any increase in the price it receives for its iron ore can boost its profitability by multiples of the underlying rise in the commodity itself. In other words, higher iron prices mean even higher profits for BHP.

Another factor that could be working in BHP’s favour is the Australian dollar. As an exporter, BHP benefits when the Aussie dollar falls in value against other currencies, particularly the US dollar. And over this week so far, we have indeed seen such a fall.

On Monday, the Aussie was trading as high as 69.5 US cents. But as of today, it has slipped slightly to almost bang on 69 cents. That’s another factor working in the BHP share price’s favour.

So it’s perhaps no wonder investors have sent the BHP share price to a new record high today after such a strong rise in its core commodity. As the ASX 200’s largest share, there won’t be too many Australians unhappy with this news.

The post Why did the BHP share price just hit a new, all-time high? appeared first on The Motley Fool Australia.

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More reading

• Will 2023 be a golden year for ASX 200 mining shares?
• What’s the outlook for ASX 200 gold shares in 2023?
• ‘High cash conversion’: 2 ASX shares to buy before they rocket even more
• 5 things to watch on the ASX 200 on Wednesday
• Broker reveals ASX 200 share with earnings expected to halve

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

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The S&P/ASX 200 Index (ASX: XJO) is back on form on Wednesday. In afternoon trade, the benchmark index is up 1% to 7,202 points.

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

European Lithium Ltd (ASX: EUR)

The European Lithium share price is down almost 4% to 7.7 cents. This morning this lithium explorer announced that its Wolfsberg Lithium project in Austria has a net prevent value of US$1.5 billion based on measured and indicated resource of 9.7 million tonnes at 1% Li2O. However, this afternoon, the company retracted its announcement and told investors to wait for its definitive feasibility study at the end of the current quarter.

PEXA Group Ltd (ASX: PXA)

The PEXA share price is down 2.5% to $12.00. Yesterday was the date of the transfer of PEXA shares to eligible Link Administration Holdings Ltd (ASX: LNK) shareholders. Some investors may have decided to sell these on-market today.

Polynovo Ltd (ASX: PNV)

The PolyNovo share price is down 2.5% to $2.44. This is despite there being no news out of the medical device company. However, prior to today, the PolyNovo share price was up almost 28% in the space of a month. This may have led to some profit taking from investors on Wednesday.

Xero Limited (ASX: XRO)

The Xero share price is down 3.5% to $69.07. Last week, Citi retained its buy rating but trimmed its price target on the cloud accounting platform provider’s shares to $92.40. This followed news that the UK has delayed its Making Tax Digital initiative by two years to April 2026. Making Tax Digital was expected to be supportive of subscriber growth in the key UK market.

The post Why European Lithium, PEXA, PolyNovo, and Xero shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• Why Lake Resources, Platinum, Polynovo, and Volpara shares are charging higher
• 2 ASX All Ords shares cracking new 52-week highs on Tuesday
• 3 ASX 200 tech shares with mission-critical products
• The Xero share price tumbled 50% in 2022. Can 2023 bring a recovery?
• My top predictions for ASX 200 shares in 2023

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

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The Australian share market is full steam ahead on Wednesday as the materials sector carries the S&P/ASX 200 Index (ASX: XJO) 0.72% higher. Some of the names heavily aiding in today’s rally are ASX lithium shares.

It appears enthusiasm has returned to a number of popular lithium-producing companies today amid several positive broker ratings. Investors are potentially breathing a collective sigh of relief — at least temporarily — following a tough month for future lithium expectations.

Is it time to buy these ASX 200 lithium shares?

Views are still mixed on what the future looks like for the electrifying commodity, lithium.

Last month, Goldman Sachs shared its belief that lithium prices will begin to disintegrate this year as additional supply hits the market. Meanwhile, other brokers — such as those at Macquarie — are forecasting a sparkling future for the lithium price based on a continued supply shortfall.

Any company that produces a commodity is largely influenced by the price of said commodity. Based on this, Jefferies and Citi must be expecting positive trends for the lightweight metal over the next 12 months based on their latest buy ratings.

Today, analysts at Jefferies have labelled Allkem Ltd (ASX: AKE) and IGO Ltd (ASX: IGO) as buys. Likewise, Citi is optimistic about the road ahead for Pilbara Minerals Ltd (ASX: PLS), assigning this ASX 200 lithium share a buy as well.

Investors are responding with strong buying pressure for these extremely profitable lithium companies. At the time of writing, shares in Allkem, IGO, and Pilbara Minerals are up 5.4%, 4.1%, and 3.8% respectively.

The all-important question is: Will the profits continue to grow to justify the valuations? At the extreme, IGO shares are now trading on a price-to-earnings (P/E) ratio of approximately 32 times. Whereas, the Australian metals and mining industry average hovers around 12 times.

Out of the three ASX 200 lithium shares rated, Allkem trades on the lowest earnings multiple at 17 times. At the same time, the $7.9 billion lithium producer also holds the lowest historical annual earnings growth rate of the three at 23%.

The post 3 ASX 200 lithium shares brokers just upgraded to ‘buy’ appeared first on The Motley Fool Australia.

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More reading

• Why Allkem, Pilbara Minerals, Talga, and Westgold shares are storming higher today
• Will 2023 be a golden year for ASX 200 mining shares?
• ‘Correction is overdone’: broker upgrades Pilbara Minerals shares to buy
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Could higher global EV sales boost ASX 200 lithium shares?

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.

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Looking to make passive income? ASX shares are one of the best ways to do it. Dividends that investors receive from shares are truly passive income. Dividend payments simply flow through to anyone who owns the shares of the company paying the dividend. No other questions asked.

If a company pays consistent dividends, the cash arrives in your bank account every six months (or more frequently, if you’re lucky) whether you are working or not, whether you are young or old, or sick or healthy.

What’s more, you can start your passive income stream with as little as $50 a week.

Now most ASX brokers charge brokerage costs on any share transaction. So depending on what your preferred broker charges you in brokerage, it might be worthwhile investing $200 every month, rather than $50 a week.

But we’ll still use that as a benchmark.

ASX shares and dividends

Well, unless you hit the jackpot on selecting your shares, it will take time to build up a solid passive income from ASX shares.

Let’s take a broad index fund to illustrate. The iShares Core S&P/ASX 200 ETF (ASX: IOZ) is an exchange-traded fund (ETF) that holds the largest 200 shares listed on the ASX in one simple fund.

That’s everything from Commonwealth Bank of Australia (ASX: CBA), Telstra Group Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP) to Coles Group Ltd (ASX: COL), Harvey Norman Holdings Limited (ASX: HVN), and Qantas Airways Limited (ASX: QAN).

The way an ETF works is that if a company it holds in its portfolio pays out a dividend, that cash is passed straight through to that ETF’s investors. Thus, it’s something of a representation of all income that comes out of the Australian share market.

So over the past 12 months, the iShares ASX 200 ETF has paid out a total of $1.78 in dividend distributions per unit (shares of ETFs are called units). On the current unit price of $28.88 (at the time of writing), this means that this ETF is currently offering a trailing dividend distribution yield of 6.16%.

So how much passive income will investing $50 a week get you?

So let’s assume that we start investing $50 a week into this ETF from today. In a year’s time, we will have approximately $2,600 invested into the iShares ASX 200 ETF.

If this ETF pays out the same level of dividend distributions over the next 12 months as it has over the past 12, we will receive a total of $160.16 in dividend income.

Now that might not sound like much. But investing takes time and (of course) cash. Say our investor continued to invest $50 a week into this ETF over 10 years. After that 10 years, we would have a total of $26,000 invested, yielding $1,601.60 per year in passive income.

This would be even higher if our investor prudently reinvested their dividend distributions into even more units of the ETF, rather than spending it.

ASX shares also tend to increase their dividends over time. If the iShares ASX 200 ETF increases its dividend distributions by 50% over those 10 years to $2.67 per unit, we would be receiving a total of $2,402.40 in passive income.

All of these amounts can be further boosted by additional investments too.

Creating a meaningful stream of passive income from ASX shares takes time and money. But if you make it a consistent habit over a long period of time, the results can start to become very rewarding.

The post How to make passive income from ASX dividend shares with only $50 a week appeared first on The Motley Fool Australia.

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More reading

• Will 2023 get better for ASX 200 shares?
• Is now really the time to buy ASX 200 shares?

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s a good day to be invested in these tiny ASX lithium shares. They’re each gaining more than 20% on the back of exciting announcements.

One has posted notable assay results while another has revealed a cornerstone investment by a lithium giant.

Let’s take a closer look at what’s going right for two ASX lithium shares you might never have heard of on Wednesday.

2 tiny ASX lithium shares soaring on major announcements

The first ASX lithium stock posting a whopping gain on Wednesday is Azure Minerals Ltd (ASX: AZS). Its share price is rocketing 24.44% at the time of writing to trade at 28 cents. Earlier today, it hit a high of 31 cents a share, an increase of almost 38% on yesterday’s closing price.

And it’s acquisition news that is providing the boost. Azure announced that lithium giant Sociedad Química y Minera de Chile (NYSE: SQM) intends to buy a 19.99% stake in the tiny ASX lithium share this morning. The stake will cost SQM $20 million, or 25.64 cents per share.

Azure will hold $25 million in cash after the acquisition. It will use the funds to accelerate exploration at its Andover lithium project in the Pilbara.

Azure managing director Tony Rovira commented on the investment, saying:

The new relationship will allow Azure to draw upon SQM’s technical expertise in pegmatite-hosted lithium exploration, project development, production, and marketing, providing Azure with strong support as we look to develop the Andover lithium assets.

The second ASX lithium share you may never have heard of posting huge gains today is Aruma Resources Ltd (ASX: AAJ). It’s up 34% right now, trading at 7.1 cents.

Its surge comes on news of assay results from the company’s Mt Deans Lithium-Rubidium Project, located in Western Australia.

The latest batch of assays show further high-grade lithium-rubidium intersections. A total of 12 intersections returned grades of more than 1.5% lithium-rubidium of various widths.

The post 2 tiny ASX lithium shares leaping over 20% on BIG news appeared first on The Motley Fool Australia.

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More reading

• Lithium M&A action: Why this ASX mining share just leapt 37%

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

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A new year has dawned, and it looks set to be a big one for Core Lithium Ltd (ASX: CXO) and its share price.

2023 is expected to be the year in which the company kicks off spodumene concentrate production at its flagship Finniss Lithium Project. But could it also be the year the company turns its first profit?

Right now, the Core Lithium share price is $1.185 – 16% higher than it was at the final close of 2022.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has lifted nearly 2% so far this year.

Let’s take a look at what the rest of 2023 might hold for the ASX 200 lithium favourite and whether the company’s bottom line could end the year in the green.

What might 2023 hold for Core Lithium shares?

The Core Lithium share price had a ripper in 2022 as the market’s anticipation for the company’s first revenue event grew. The stock surged 73% over the 12-month period.

And the big news came shortly after the new year began. Core Lithium announced the first shipment of lithium from the project had sailed, marking the company’s first revenue event.

And the market likely won’t be waiting long until the next big announcement. The company is expecting to kick off spodumene concentrate production in the current half.

Additionally, around 80% of the project’s lithium is already secured under binding offtake agreements.

However, there’s more to reaching profitability than bringing in revenue.

Let’s dive into Core Lithium’s balance sheet

Core Lithium posted a $7.46 million loss for financial year 2022.

Of course, the company’s revenue would need to surpass its upcoming losses before it reaches profitability. It’s hard to say whether that will occur in 2023.

It’s also worth noting that around $27,000 of finanical year 2022’s loss was attributed to exploration and evaluation expenses. At the company’s recent annual general meeting, chair Greg English highlighted that its exploration budget for calendar year 2022 was its largest to date and was expected to double in 2023.

Thus, it’s reasonable to assume the company’s expenses might increase in the near future.

Though, it’s worth noting it’s managed to keep debt off of its balance sheet. That’s no mean feat for a mineral exploration and development company!

It boasted $95.5 million of cash at the end of September and has since completed a $100 million capital raise, leaving it well funded for the time being.

Fellow ASX 200 lithium share’s journey to profitability

To provide an example of how long lithium fans have previously waited for market favourites to break even, let’s take a look back on Pilbara Minerals Ltd (ASX: PLS)’s journey to profitability.

Of course, the lithium industry was a different beast when the now-S&P/ASX 50 Index (ASX: XFL) giant was up-and-coming. It’s also worth noting Pilbara Minerals is a starkly different company than Core Lithium. Thus, their respective paths to profitability will probably exhibit major differences.

Still, it wasn’t that long ago that Pilbara Minerals was announcing its Pilgangoora Project’s first shipment of lithium concentrate. The maiden shipment set sail in October 2018.

The following years, however, brought ups and downs for the lithium market. Pilbara Minerals’ first profit ultimately wasn’t reached until financial year 2022, when it came in at $560 million.

When might Core Lithium post a profit?

With that in mind, fans of Core Lithium shares may want to hedge their excitement for a 2023 profit.

Though, one broker is hopeful the company could start raking it in in the not-so-distance future.

Macquarie is tipping the company to post strong free cash flows by financial year 2024 and 2025, my Fool colleague Mitch reports.

The post Will Core Lithium turn a profit in 2023? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• These 3 ASX 200 lithium shares outperformed all others in 2022
• Could higher global EV sales boost ASX 200 lithium shares?
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why is the Core Lithium share price soaring 4% on Monday?

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

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is heading in the right direction again. At the time of writing, the benchmark index is up 1% to 7,200.3 points.

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

Allkem Ltd (ASX: AKE)

The Allkem share price is up 6% to $12.57. Investors have been buying this lithium miner’s shares in response to a positive broker note out of Jefferies. According to the note, the broker has upgraded Allkem’s shares to a buy rating with an improved price target of $15.50. The broker sees risks to lithium supply growth, which bodes well for prices in the near term.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is up 5% to $4.06. This has also been driven by a bullish broker note. According to a note out of Citi, its analysts have upgraded this lithium miner’s shares to a buy rating with a $4.70 price target. The broker commented: “PLS has pulled back ~30% since November against weaker-than-expected— albeit still growing—EV sales and anticipated battery supply chain destocking. In our view, the correction is overdone and we upgrade PLS to Buy from Neutral.”

Talga Group Ltd (ASX: TLG)

The Talga share price is up 6% to $1.68. This follows the announcement of a non-binding letter of intent with French electric vehicle battery manufacturer Verkor. According to the release, the two parties are looking at offtake supply agreements for Talga’s flagship graphite anode product, Talnode-C.

Westgold Resources Ltd (ASX: WGX)

The Westgold share price is up over 7% to $1.12. This morning, this gold miner released an update on its performance during the second quarter. Westgold delivered record production of 110,606 tonnes at 3.47g/t Au. This is up from its previous record of 90,588t at 3.2g/t Au during the prior quarter. The company also released “outstanding” drilling results.

The post Why Allkem, Pilbara Minerals, Talga, and Westgold shares are storming higher today appeared first on The Motley Fool Australia.

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More reading

• Will 2023 be a golden year for ASX 200 mining shares?
• ‘Correction is overdone’: broker upgrades Pilbara Minerals shares to buy
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Could higher global EV sales boost ASX 200 lithium shares?
• Down 11% in a month, should I buy the dip in Pilbara Minerals shares?

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

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S&P/ASX 200 Index (ASX: XJO) mining shares have been through plenty of turmoil over the last 12 months. So will 2023 turn out to be a great year?

No one can truly know what’s going to happen next. Resource prices are notoriously difficult to predict, which subsequently makes it tricky to forecast how ASX 200 mining shares are going to perform.

There are a number of different miners within the ASX 200 including the iron ore miners of BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG), and Mineral Resources Ltd (ASX: MIN).

Mineral Resources also has lithium operations. Other ASX 200 lithium shares include Pilbara Minerals Ltd (ASX: PLS), IGO Ltd (ASX: IGO), Allkem Ltd (ASX: AKE), and Sayona Mining Ltd (ASX: SYA)

Gold miners also have plenty of representation with names like Newcrest Mining Ltd (ASX: NCM), Evolution Mining Ltd (ASX: EVN), Perseus Mining Limited (ASX: PRU), and De Grey Mining Limited (ASX: DEG).

There is also exposure to commodities like copper, nickel, and other minerals within the ASX 200.

What’s the outlook for ASX 200 mining shares?

For iron ore, things are looking a lot brighter than a few months ago. As the biggest buyer of iron ore, China’s move to end COVID lockdowns may be a boost for iron demand as economic activity starts normalising.

China is enacting more initiatives to support its troubled real estate sector. A stronger construction industry could mean higher demand for steel/iron ore.

A recovery of activity in China could also mean more demand for things like copper, nickel and possibly lithium, particularly if decarbonisation investment is ramped up across the country.

Lithium miners have been through enormous volatility over the past year. Their performance in 2023 could be decided by the movement of the lithium price. A report by KPMG suggests there is enormous demand ahead for lithium if the world is to move away from the combustion engine by 2050, requiring two billion electric vehicles.

I recently covered some expert thoughts on the gold sector, which suggest the gold outlook for 2023 is improving.

Foolish takeaway

I’m not sure where the share prices of the ASX 200 mining shares will end up at the end of 2023, but I think that with the strengthening of prices for a number of commodities, it’s looking good for short-term profitability and dividends.

However, I think it’d make more sense to buy resource businesses when the outlook is weakening and sentiment is low. So, for now, I’d be happy to wait on the sidelines to give myself a better chance of capital gains.

The post Will 2023 be a golden year for ASX 200 mining shares? appeared first on The Motley Fool Australia.

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More reading

• The gold price is trading at 8-month highs. What’s next in 2023?
• What’s the outlook for ASX 200 gold shares in 2023?
• Could ASX 200 gold shares provide a safe haven for investors in 2023?
• ‘Correction is overdone’: broker upgrades Pilbara Minerals shares to buy
• If you invested $1,000 in Fortescue shares 10 years ago, here’s how much dividend income you’ve pocketed

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals 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.

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Woolworths Group Ltd (ASX: WOW) shares could be trading at a very attractive level.

That’s the view of analysts at Goldman Sachs, which have the retail conglomerate on their coveted conviction list.

What is the broker saying about Woolworths shares?

According to the note, the broker sees significant value in the Woolworths share price at the current level.

Its analysts have a conviction buy rating and $41.70 price target on its shares. This implies potential upside of 23% for investors over the next 12 months.

And to sweeten the deal further, the broker is expecting a fully franked $1.02 per share dividend in FY 2023.

This represents a 3% dividend yield, which stretches the total potential return to approximately 26%.

Solid growth ahead

Although Woolworths had a softer than expected start to FY 2023, the broker remains positive on the future and believes it is well-positioned for solid growth over the coming years.

So much so, it feels the level of growth it is forecasting means that Woolworths shares deserve to trade on higher multiples. It commented:

Despite a noisy and softer 1Q23, we remain confident that WOW is the superior operator within AU supermarkets with a clear growth pathway to deliver ~3% sales and ~9% NPAT FY22-25e CAGR. WOW is trading at 22.1x FY24E P/E vs our TP implied 27.8x and historical average of 23.2x, providing a value entry point to a quality player in our view.

This growth is expected to be driven partly by its high level of customer loyalty and omni-channel advantage. Goldman explained:

We are Buy rated (on Conviction List) on the stock as we believe the business has one of the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as pass through any cost inflation to protect its margins, beyond market expectations.

All in all, the broker appears to believe this makes Woolworths a blue chip to buy in 2023.

The post Buy Woolworths shares for 23% upside AND dividend income: Goldman appeared first on The Motley Fool Australia.

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More reading

• How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?
• Build a strong portfolio in 2023 with these ASX 200 blue chip shares: experts
• Woolworths shares have fallen to pre-pandemic levels. Time to buy?
• Top brokers name 3 ASX shares to buy
• Buy these growing ASX 200 dividend shares in 2023: experts

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

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