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

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

Why is this ASX 300 retail stock surging?

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

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

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

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

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

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

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

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

Second half improvement

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

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

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

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

The post Why is this ASX 300 retail stock surging 7% today? appeared first on The Motley Fool Australia.

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

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

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

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

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

AGL Energy Ltd (ASX: AGL)

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

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

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

How cheap is the ASX share?

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

Accent Group Ltd (ASX: AX1)

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

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

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

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

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

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

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• Are AGL or Pilbara Minerals shares a better buy?
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Motley Fool contributor Tristan Harrison has positions in Accent Group and Agl Energy. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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

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

Aeris Resources Ltd (ASX: AIS)

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

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

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

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

AVITA Medical Inc (ASX: AVH)

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

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

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

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

The post These small cap ASX shares could rise 35% to 75% appeared first on The Motley Fool Australia.

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• Bell Potter names the best ASX mining stocks to buy in FY25
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Avita Medical. The Motley Fool Australia has recommended Avita Medical. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Analysts are starting to sound the alarm

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

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

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

The cracks haven’t appeared yet

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

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

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

Is Nvidia stock a buy?

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

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

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

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• Is it too late for ASX investors to start buying US shares?
• Which ASX shares could soar if AI falls into a $500 billion hole?

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

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

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

Dexus Industria REIT (ASX: DXI)

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

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

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

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

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

GDI Property Group Ltd (ASX: GDI)

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

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

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

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

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

Woodside Energy Group Ltd (ASX: WDS)

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

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

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

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

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

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

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

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

Which ASX growth stock?

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

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

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

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

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

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

Why is the broker bullish?

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

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

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

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

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

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

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

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

BHP Group Ltd (ASX: BHP) shares were out of form on Wednesday. The mining giant’s shares ended the day almost 1% lower at $42.70.

Investors were hitting the sell button following the release of its fourth quarter update. This was despite the Big Australian reporting record iron ore production and delivering impressive copper production.

With the company’s shares now down 16% from their 52-week high, investors may be wondering if it is time to buy. So, let’s see what analysts are saying.

What are analysts saying about BHP’s update?

According to a note out of Goldman Sachs, its analysts were pleased with BHP’s strong finish to the financial year. This was particularly the case with its copper operations, which is good news given the positive outlook for the base metal. It commented:

A strong finish to the year across all divisions. Copper production of 505kt exceeded expectations by 8%, delivering the strongest production result in 15 years. All assets performed well with realised pricing better than GSe on provisional pricing lower TC/RCs. Spence exceeded guidance as the recent concentrator upgrades translated to a notable uplift in recoveries that should improve further, and grades bounced back at Escondida that will remain at similar levels as group copper production is expected to increase ~4% in FY25 (1.85-2.05Mt, GSe 1.94Mt).

Pilbara [iron ore] shipments of 75.9Mt came in 2% ahead but realised pricing was marginally lower than GSe; FY25 guidance of 282-294Mt is as expected (GSe/VA 288Mt/291Mt) as efforts focus on rail tie-ins and port debottlenecking ahead of volumes creep target of 305Mtpa by FY28.

In light of the above, the broker believes that BHP is going to report a full year result largely in line with the market’s expectations next month. It said:

We forecast FY24 U/L EBITDA of US$28.8bn (VA US$28.8bn – before Q) and U/L NPAT of US$13bn (VA US$13.3bn). We model 2H’24 U/L EPS of USc128/sh (US$6.5bn) and a final DPS of USc70/sh (55% payout, FY DPS of USc142/sh vs VA at USc149/sh). We expect net debt (BHP disclosed) at US$9.8bn (VA US$10.7bn).

Should you buy BHP shares?

In response to the update, Goldman Sachs has retained its buy rating and $48.40 price target on BHP’s shares.

Based on its current share price, this implies potential upside of approximately 13.5% for investors over the next 12 months.

In addition, a dividend yield of ~4.7% is expected over the period, which stretches the total potential return to approximately 18%.

Goldman believes its premium valuation is justified. It commented:

BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8xNAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).

The post Could BHP shares provide an 18% return for investors? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• BHP share price on watch after record-breaking FY24 iron ore production
• 5 things to watch on the ASX 200 on Wednesday
• No savings? I’d use the Warren Buffett method to earn lifelong passive income with ASX shares
• Why are BHP and other ASX 200 mining shares getting hammered 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 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 downtrend in BrainChip Holdings Ltd (ASX: BRN) shares shows no signs of exhaustion with the ASX artificial intelligence (AI) stock hitting three-month lows on Tuesday.

Winding back to 27 June, a little less than three weeks ago, shares in Brainchip were fetching 22.5 cents. Since then, investors have continued to sell shares at lower and lower prices.

They finished the session on Wednesday at 19.8 cents, down 15% from this mark.

With the continued selling pressure, one can’t help but wonder, what’s next for Brainchip shares?

Brainchip’s struggles in FY24

Brainchip shares underperformed by a wide margin in FY24, plunging by nearly 39%. The stock peaked at 49 cents per share in February but has since fallen dramatically.

A post-mortem analysis shows that there were a couple of factors behind this volatility. Here’s the lowdown:

1. AI stock mania driving BrainChip shares

BrainChip’s significant rise in February was likely influenced by the soaring stock of US-listed AI giant Nvidia Corp (NASDAQ: NVDA).

For anyone who missed it, Nvidia’s stock price went vertical from around US$475 on 3 January to more than US$1,000 per share by May. This speculative trading drove up BrainChip shares despite the company’s unproven financial performance.

But it wasn’t long before the market snapped back to economic reality. Unlike Nvidia, which grew earnings by more than 600% in Q1, BrainChip reported a net loss of US$28.9 million for FY23, with sales declining by 95% year over year.

2. Disappointing fundamentals

BrainChip specialises in neuromorphic computing, a niche area within AI that replicates the human brain’s processing power.

The company released the second generation of this technology, Akida, in FY24. But despite this innovation, BrainChip has yet to secure significant royalty agreements for its intellectual property.

In the wake of declining revenues, this may have been a fan to the flames already charring BrainChip shares. Investors were expecting more.

As my colleague James said in a separate analysis, Brainchip “has promised the world and delivered nothing in a market dominated by a US$3 trillion behemoth”. That behemoth is Nvidia.

At the recent AGM, BrainChip CEO Sean Hehir said the company was in licensing discussions that could lead to potential sales in the audio and microcontroller segments.

However, as my colleague Rhys noted, “Investors will need to see that translated into real sales” first to get behind the company.

3. Sentiment is flat in BrainChip shares

Analysts are hesitant, too. Peak Asset Management recently recommended selling BrainChip shares following the lacklustre financials.

At the end of Q1 CY24, the company’s cash reserves decreased from US$14.3 million to US$13 million, with rising operating cash outflows and lower cash inflows from customers.

“Cash inflows from customers were lower in the March quarter compared to the prior quarter”, Peak AM said, noting it “prefer[s] other stocks at this stage of the cycle”.

Foolish takeout: What does this mean for investors?

AI has become somewhat of a mania in 2024. BrainChip alone faces stiff competition from major players like Nvidia.

This increased competition and the company’s financials have added to investor concerns about BrainChip’s ability to compete in this rapidly evolving market.

I’d say that’s why BrainChip shares have had a volatile year, and why the road ahead remains uncertain. While the company’s innovative technology holds promise, it needs to deliver on its revenue potential to regain investor confidence.

Investors might want to weigh the potential rewards against the risks.

The post Down 15% in less than 3 weeks, what’s next for Brainchip shares? appeared first on The Motley Fool Australia.

More reading

• BrainChip shares struggle in FY24 – what’s ahead for FY25?
• Is it time to give up on BrainChip shares?
• Brainchip share price tumbles 40% in the past year. What’s next?

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

The Insurance Australia Group Ltd (ASX: IAG) share price performance has been very pleasing in 2024 to date. It has risen almost 30%, while the S&P/ASX 200 Index (ASX: XJO) has only risen around 6%.

We shouldn’t try to predict where the IAG share price will be in two months. But, we can evaluate whether the ASX share is a good longer-term opportunity today.

Several factors have helped the insurer in recent times, including elevated premium increases (amid higher inflation), stronger investment earnings (thanks to higher bond yields and strong equity markets), and relatively stable natural peril events.

Soon enough, we will see the company’s FY24 results during the August reporting season.

Recent developments

IAG announced last month that it had signed two five-year strategic agreements with global reinsurers to improve its “future financial stability”.

The ASX insurance share said the long-term natural perils volatility protection with Berkshire Hathaway and Canada Lie Reinsurance provides “greater certainty over natural perils costs for customers.” This provides up to $680 million of additional protection annually and up to $2.8 billion over the five-year period.

This will “effectively limit” IAG’s natural peril costs to $1.28 billion in FY25, a 17% increase on the FY24 figure.

It also said it had purchased adverse development cover (ADC), which provides $650 million of protection for IAG’s long-tail reserves of approximately $2.5 billion.

The company revealed it expects the FY24 reported insurance profit to be at the upper end of its $1.2 billion to $1.45 billion guidance range, compared to $803 million in FY23. The reported insurance margin is expected to be at the upper end of the 13.5% to 15.5% guidance range, taking into account the ADC cost.

FY24 gross written premium growth is expected to be consistent with its “low double-digit” guidance.

So, things are going well for the company, and it has made moves to reduce long-term volatility.

Is the IAG share price an opportunity?

The broker UBS suggested the reinsurance deals are “likely to improve investor perceptions of earnings quality.”

UBS thinks the insurance margin will “push up through 16%” during FY25 after double-digit repricing during FY24. The broker then said:

We continue to believe consensus is under estimating peak-cycle margins, albeit the reinsurance deals announced today likely present a near-term drag. We are modelling a margin overshoot over the next 12-18 months, relative to mid-cycle guidance.

…A profit commission is payable in the event of favourable perils, effectively skewing IAG’s exposure to the upside whilst protecting downside.

UBS then noted that the 10-year average for IAG shares’ price/earnings (P/E) ratio is 15.5x, compared to the current IAG share valuation of 16.5x UBS’ estimated earnings for FY25.

UBS concluded with comments on the valuation:

This looks somewhat demanding and we see better value in other GI [general insurance] names at present.

The broker has a $7.10 price target on IAG shares, which implies that shareholders will not see any capital growth in 12 months, considering the current share price is $7.11.

The post Are IAG shares a buy before reporting season? appeared first on The Motley Fool Australia.

More reading

• Up 26% this year, what’s the view on IAG Shares?
• How ASX shares vs. property performed in June
• Here’s a recap on IAG shares in FY24 – and their FY25 outlook
• Here are the top 10 ASX 200 shares today
• 9 ASX 200 shares finishing FY24 on a 52-week high

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

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was back on form and charging higher. The benchmark index rose 0.7% to 8,057.9 points.

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

ASX 200 expected to fall

The Australian share market looks set to fall on Thursday following a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 41 points or 0.5% lower this morning. In the United States, the Dow Jones was up 0.6%, but the S&P 500 fell 1.4% and the Nasdaq dropped 2.8%.

Oil prices charge higher

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 2.6% to US$82.89 a barrel and the Brent crude oil price is up 1.6% to US$85.09 a barrel. A large drop in US inventories boosted prices.

Buy BHP shares

Goldman Sachs thinks BHP Group Ltd (ASX: BHP) shares are good value at current levels. In response to the mining giant’s fourth quarter update, the broker has retained its buy rating and $48.40 price target on its shares. This implies potential upside of over 13% for investors from current levels. It said: “After reflecting the June Q and financial disclosures ahead of the result, there is little change to our EBITDA forecasts; FY26 EPS increases 2% on minor changes to D&A and net interest.”

Gold price eases

It could be a subdued session for ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price eased lower overnight. According to CNBC, the spot gold price is down 0.15% to US$2,464.3 an ounce. This appears to have been driven by profit taking after the gold price reached a record high a day earlier.

Fortescue job cuts

Fortescue Ltd (ASX: FMG) shares will be on watch today after the miner announced major job cuts. While the company “remains resolute in its commitment to be the world’s leading green technology, energy and metals company”, it revealed that “initiatives are being implemented to simplify its structure, remove duplication and deliver cost efficiencies.” In light of this and in order to deliver on its strategy and generate the maximum value for shareholders, approximately 700 people from across Fortescue’s global operations will be offered redundancies.

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

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• 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
• ASX gold shares race higher after gold price hits record high

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