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The Fortescue Metals Group Limited (ASX: FMG) share price could be seriously overvalued.

That’s the view of analysts at Goldman Sachs following the release of the mining giant’s full year results for FY 2022.

What is Goldman saying about the Fortescue share price?

According to a note out of the investment bank, its analysts have responded to Fortescue’s results by reiterating their sell rating and $12.10 price target on the company’s shares.

Based on the current Fortescue share price of $18.95, this implies potential downside of 36% over the next 12 months.

What did the broker say?

Goldman notes that Fortescue delivered a full year result in line with expectations. It commented:

FMG reported FY22 underlying EBITDA/NPAT of US$10.6bn/US$6.2bn, in-line/+1% vs. GSe and VA consensus. The final dividend of A121cps (78% payout), was above our A109cps (70% payout). There was no change to iron ore guidance for FY23.

However, once again, the broker highlights that overshadowing this was Fortescue’s decarbonisation plans. Goldman continues to believe it will come at a significant cost. It explained:

Regarding decarbonisation of iron ore, FMG continues to target first battery driven electric truck in 2025 with the fleet decarb to be supported by the proposed 5.4GW wind and solar Uaroo project. We think decarbonising the Pilbara could cost FMG over US$7bn (spend not in our numbers) and requires +US$80/bbl oil or an iron ore green premia to be NPV positive.

The broker also warned that the company’s dividends could come under pressure from these plans.

We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious new strategy, we assume the dividend payout ratio falls from the current ~75% in FY22 and then to ~50% from FY24 onwards.

Why are its shares overvalued?

Overall, Goldman Sachs believes the Fortescue share price is overvalued based on the undeserved premium it trades at compared to BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO). It explained:

The stock is trading at a premium to BHP & RIO; c. 1.7x NAV vs. RIO & BHP at c. 0.8x & 1.1x NAV, c. 6x EBITDA (vs. BHP on 6x & RIO on c. 3.5x), and c. 4% FCF vs. BHP on c. 4% & RIO on c. 10%.

The post Goldman Sachs warns that the Fortescue share price could crash 36% lower appeared first on The Motley Fool Australia.

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More reading

• Can Twiggy really build Fortescue into a ‘green global energy and metals machine’?
• 5 things to watch on the ASX 200 on Tuesday
• Why is the Rio Tinto share price having such a lousy start to the week?
• How does the BHP dividend stack up against the latest Fortescue payment?
• Everything you need to know about the trimmed-down Fortescue dividend

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 De Grey Mining Limited (ASX: DEG) share price is having a tough year.

Since the start of 2022, the gold developer’s shares have lost 27% of their value.

While clearly there have been a lot of sellers of its shares, recently there has been a notable buyer of them.

Who is buying De Grey shares?

This week it was confirmed that ASX 200 gold miner Gold Road Resources Ltd (ASX: GOR) has been topping up its holding in De Grey Mining.

According to the release, Gold Road, via its wholly owned subsidiary Renaissance Resources, acquired an additional stake in De Grey Mining earlier this week under an equity collar agreement with Credit Suisse. The company agreed to pay approximately $1.00 per share for the parcel of 65,938,098 shares.

This ~$66 million deal increased its interest in De Grey Mining to 19.99%.

Is a takeover looming?

While you could never rule out a takeover being made, that’s not the intention at this point. The company explained:

This intended acquisition of further shares in DEG is consistent with Gold Road’s stated strategy to grow and diversify its growth pipeline. At this stage, this shareholding is seen as a long-term investment and Gold Road does not intend to make a takeover bid or other offer for DEG, but Gold Road reserves its right to do so and to make further investments in DEG at any time.

Gold Road certainly is no stranger to takeovers. Earlier this month the company completed the acquisition of DGO Gold via an all-scrip deal valuing the transaction at approximately $250 million.

It was also chasing Apollo Consolidated last year before being outbid by fellow gold miner Ramelius Resources Limited (ASX: RMS).

The post Guess which ASX 200 company bought over $65 million of De Grey shares in August appeared first on The Motley Fool Australia.

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More reading

• Gold Road share price lifts as half-year profit doubles
• These are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Why has the De Grey share price leapt 36% in a month?

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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National Australia Bank Ltd (ASX: NAB) shares are in focus as the big four ASX bank share looks to try to win over some new customers.

According to reporting by news.com.au, NAB has decided to reduce its variable home loan rate by 30 basis points. That means it’s a decrease of 0.30%.

However, that decrease isn’t for all customers. It’s reportedly just for new customers only. Existing customers are seeing their mortgage rates soar as the big four ASX bank shares pass on the Reserve Bank of Australia’s (RBA) interest rate rises.

Is this a good thing or a bad thing?

The media outlet news.com.au reported comments by Rate City research director Sally Tindall who implied that NAB (and others) may essentially be charging customers a loyalty tax for sticking with the bank.

Tindall said:

Log on to your banking app and check what rate you’re paying. While you’re there, work out the exact name of your loan.

Then look at your bank’s website to see what rate it’s offering new customers.

With refinancing at record highs and billions of dollars’ worth of fixed loans coming to an end, lenders are cutting variable rates to attract new borrowers.

If you think as a loyal, long-serving customer your bank is doing right by you, double check that’s actually the case. The results could surprise you.

But, for new customers, it could be a positive.

Is NAB losing market share?

According to research from Macquarie Research and APRA, NAB is the only big bank that gained housing market share over the 12 months to July 2022. Its housing market share increased by just under 20 basis points, while CBA’s housing market share dropped more than 10 basis points. At the same time, Westpac’s housing market share fell almost 100 basis points and ANZ’s market share has fallen more than 100 basis points.

The CEO of Liberty Financial Group Ltd (ASX: LFG), James Boyle, suggested that smaller lenders might be able to gain ground on the big banks. This comes as falling house prices could mean some customers are deemed too risky for major banks as they focus on the safest type of borrowers, according to reporting by the Australian Financial Review.

Boyle noted that there is “vigorous competition for mainstream customers with low loan to value ratios, strong earnings and who are a great credit”. He also suggested there could be even stronger competition for that type of borrower.

Is the NAB share price a buy?

Brokers are a bit mixed on the big four ASX banks at the moment. There is a general view that higher interest rates will help bank profitability, translating into better net interest margins (NIMs). However, there is also a concern that higher interest rates could lead to higher bad debts over time.

Morgan Stanley currently has an ‘equal-weight’ rating on NAB, with a price target of $27.20. That implies a drop of almost 10%.

But Ord Minnett has an ‘accumulate’ rating on NAB. The price target is $32.70 which implies a rise of around 9%. It thinks that NAB’s revenue can keep growing well in the short term.

The post Will this build value for NAB shareholders or alienate the bank’s customers? appeared first on The Motley Fool Australia.

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More reading

• Are ANZ shares really offering the highest dividend yield of the big four?
• NAB is the ASX 200 bank share I’d buy today
• The NAB share price is trading on a 4.6% dividend yield right now. How does this compare to other banks?
• The NAB share price has gained 5% since last week’s update. What’s next?
• These top ASX dividend shares have been tipped as buys by analysts

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

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Investors might wonder why the next Insurance Australia Group Ltd (ASX: IAG) dividend is not fully franked.

The 5 cents per share that is due to be paid to shareholders on 22 September will only be franked by 70%.

One possible reason why the IAG dividend is not fully franked is due to the ups and downs the general insurance company has gone through over the last couple of financial years.

In FY21, the business reported a $427 million loss. Earnings bounced back sharply in FY22, though, with net profit after tax (NPAT) reaching $347 million.

The company could therefore be in the process of returning value back to investors gradually as it recovers from the economic tremors of COVID-19.

Something to keep in mind, too, is that the interim dividend of 6 cents per share — giving a full-year dividend of 11 cents per share — paid out in March was unfranked.

In FY21, or the same year IAG recorded a huge loss, its full-year dividend of 20 cents was also unfranked.

In FY20, just after the peak of the pandemic, the company didn’t pay out a final dividend to investors at all, and paid a 10 cent interim dividend, 70% franked.

It should be noted that, until recently, it was unusual for IAG’s dividend to be partially franked, as its interim and final dividends have been fully franked from March 2001 up until August 2018.

The 5 cents per share dividend is also the lowest level since March 2012, with dividends normally fluctuating in the 15 cents to 20 cents range or higher from September 2013 to October 2018.

So FY22’s franking of 70% could be seen as a significant improvement over the last couple of years, at least from a franking perspective. And as life moves on from the new normal, investors may look forward to higher and fully franked dividends in the future.

IAG share price snapshot

The IAG share price closed 2.18% higher today at $4.69. That takes its gains in 2022 so far to more than 5%.

Meanwhile, the broader market is struggling, with the S&P/ASX 200 Index (ASX: XJO) down almost 8% over the same period.

IAG has a market capitalisation is $11.31 billion.

The post Why is the next IAG dividend not fully franked? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Could wild spring weather threaten the performance of IAG shares?
• Here’s why the IAG share price is slumping today
• Looking to buy IAG shares but worried about where the growth will come from? Read this
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor Matthew Farley 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 positions in and has recommended Insurance Australia Group Limited. 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 Hastings Technology Metals Ltd (ASX: HAS) share price has soared in the past week.

Shares in the rare earth explorer have jumped almost 24% from $4.39 at market close on 23 August to $5.44 at today’s close.

Let’s take a look at why Hastings Technology shares have leapt this past week.

Rare earths deal

Hastings Technology is a rare earths company exploring the Yangibana and Brockman projects in Western Australia.

Investors bought up Hastings Technology shares amid acquisition news and a $150 million investment from Wyloo Metals. Wyloo Metals is part of Andrew ‘Twiggy’ Forrest’s investment holding company Tatterang.

Hastings Technology is proposing to acquire a 22.1% share of Neo Performance Materials Inc (TSX: NEO). Neo is a rare earths processing company and permanent magnets producer listed on the Toronto Stock Exchange. Hastings has entered into a binding share purchase agreement to acquire 8,974,127 shares in Neo.

To fund this acquisition, Wyloo Metals has committed to invest $150 million in Hastings via exchangeable notes. These can be converted to Hastings shares for $5.50 each. Wyloo will also be able to nominate a director to the Hastings board as part of the deal.

Commenting on the news, Hastings executive chairman Charles Lew said:

The acquisition of the Neo stake represents an important strategic milestone for Hastings…

We are also thrilled to welcome the support of and strategic investment by Wyloo Metals.

Meanwhile, Datt Capital chief investment officer Emanuel Datt has recently named Hastings among five ASX shares that could rise if China restricts rare earths supply to countries it disagrees with in the future. China currently supplies 80% of the world’s rare earths.

Share price snapshot

The Hastings Technology share price has surged 36% in the past year, while it has climbed nearly 5% year to date.

In the past month, Hastings shares have lifted 33%.

Hastings has a market capitalisation of about $552 million based on the current share price.

The post The Hastings Technology share price has rocketed 24% in a week. What’s going on? appeared first on The Motley Fool Australia.

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More reading

• Why is the next IAG dividend not fully franked?
• AMP share price lifts amid Westpac deal rumours
• Here are the top 10 ASX 200 shares today
• Why this analyst ranks ANZ shares at the bottom of the big-four-bank pile
• Here’s why this ASX All Ords tech share rocketed 34% today

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 AMP Ltd (ASX: AMP) share price finished higher on Tuesday, up 1.82% to $1.12.

The share price move follows rumours that AMP has put in a final offer to buy the wealth management arm of Westpac Banking Corp (ASX: WBC).

According to reporting by The Australian, AMP may have pipped Colonial First State for the prize. Final bids were due on 22 August.

According to the article, “AMP could be in the box seat to buy Westpac’s wealth management unit with sources suggesting that the Australian listed financial group put in a final offer for the company”.

The article said:

Sources say that Colonial First State lobbed a bid that may have been as low as $600m, while others say that AMP put forward a proposal believed to be at a higher price.

In the first round, CFS was thought to have been the only group to have put forward a conforming bid.

Earlier, it was expected that the unit would sell for at least $700m, but prices were adjusted downwards amid a period of market volatility.

Why is Westpac selling its wealth management division?

In May, Westpac sold the wealth management division’s superannuation operations to Mercer Australia.

According to the article, banks have been retreating from non-core business activities to focus on home loans and business banking.

That’s certainly the case at Westpac, with specialist businesses CEO Jason Yetton recently describing the sale of the superannuation business as a “further step in the simplification of Westpac”.  

In August 2021, Westpac also sold its life insurance division to TAL for $900 million.

Morgan Stanley is advising Westpac on the sale of its wealth management division, which includes its Panorama platform.

AMP share price snapshot

The AMP share price is up 12% in the year to date.

This compares to an 8% dip in both the S&P/ASX 200 Index (ASX: XJO) and the S&P/ASX 200 Financials Index (ASX: XFJ).

The post AMP share price lifts amid Westpac deal rumours appeared first on The Motley Fool Australia.

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More reading

• What’s the outlook for the Westpac share price in September?
• Are ANZ shares really offering the highest dividend yield of the big four?
• Goldman Sachs names 4 reasons the Westpac share price is cheap
• 2 excellent ASX 200 dividend shares that brokers love
• Is the Westpac share price a buy for the bank’s ‘surplus capital’?

Motley Fool contributor Bronwyn Allen has positions in Westpac Banking Corporation. 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 Westpac Banking Corporation. 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) bounced back today following a 2% tumble that saw only four shares close higher on Monday. The index lifted 0.47% in Tuesday’s session to close at 6,998.30 points.

In the lead was the S&P/ASX 200 Information Technology Index (ASX: XIJ), with an 1.8% gain.

The S&P/ASX 200 Energy Index (ASX: XEJ) came in next best with a 1.4% rise, helped along by the Woodside Energy Group Ltd (ASX: WDS) share price. It rose 1.5% following the company’s half-year earnings and a monster dividend.

Surging oil prices also likely helped bolster the sector. The Brent crude oil price rose 4.1% to US$105.09 a barrel overnight while the US Nymex crude oil price lifted 4.2% to US$97.01 a barrel.

Meanwhile, the S&P/ASX 200 Materials Index (ASX: XMJ) recorded the worst performance, slipping 0.04% today. It was weighed down by the Sandfire Resources Ltd (ASX: SFR) share price, which slumped 3.6% on the back of the company’s financial year 2022 results.

So, with all that in mind, which ASX 200 share outperformed all others on Tuesday? Keep reading to find out.

Top 10 ASX 200 shares countdown

Shares in ASX 200 materials giant Mineral Resources Ltd (ASX: MIN) took out the top spot on the market, gaining 6% today. The company’s stock fell 1.7% yesterday on the back of its full-year earnings.

Today’s biggest gains were made by these ASX shares:

ASX-listed company	Share price	Price change
Mineral Resources Ltd (ASX: MIN)	$67.96	6.2%
A2 Milk Company Ltd (ASX: A2M)	$5.73	6.11%
Paladin Energy Ltd (ASX: PDN)	$0.815	5.84%
EML Payments Ltd (ASX: EML)	$0.905	5.23%
Lake Resources Ltd (ASX: LKE)	$1.12	5.16%
Chalice Mining Ltd (ASX: CHN)	$4.35	5.07%
Novonix Ltd (ASX: NVX)	$2.33	4.95%
Webjet Limited (ASX: WEB)	$5.11	4.5%
Northern Star Resources Ltd (ASX: NST)	$7.79	4.42%
Imugene Limited (ASX: IMU)	$0.24	4.35%

Our top 10 ASX 200 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

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

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More reading

• Could this give some ASX lithium shares the edge?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why A2 Milk, Deep Yellow, Healius, and IGO shares are racing higher
• Are A2 Milk shares ‘turning a corner’ on the daigou debacle?
• Why is the Paladin Energy share price up 6% today?

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 positions in and has recommended EML Payments. The Motley Fool Australia has positions in and has recommended EML Payments. The Motley Fool Australia has recommended A2 Milk and Webjet Ltd. 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 Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is not attractive to some analysts.

The reasons why investors are not jumping on ANZ shares could partly explain why the ANZ share price is down 18% in 2022.

ANZ is one of the big four ASX bank shares alongside Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

But, the bank’s decision to try to buy the banking operations of Suncorp Group Ltd (ASX: SUN) has put ANZ’s operational difficulties under the spotlight.

What’s going wrong with ANZ?

The Age reported on the recent changes in market share of the big four banks, according to Macquarie Research and APRA in July 2022.

NAB is the only major bank to achieve a higher market share over the past 12 months. But, ANZ’s loss of housing market share sticks out like a sore thumb. ANZ’s market share of housing dropped by more than 100 basis points over 12 months to July 2022, meaning its market share reduced by more than 1%.

The newspaper reported that at the end of last year, ANZ’s processing times for a home loan application had reached 51 days. Macquarie Group Ltd (ASX: MQG), which wants to grow Macquarie Bank, had a loan turnaround time of around a week. ANZ says things are getting better.

But, The Age quoted a former employee that questioned ANZ about this. That employee reportedly said:

I don’t understand why it has taken them so long to fix it.

Is the Suncorp acquisition the answer?

ANZ wants to buy the banking operations of Suncorp Group Ltd (ASX: SUN) for $4.9 billion.

This acquisition includes $47 billion of home loans with a “strong risk profile”, $45 billion in “high-quality” deposits and $11 billion in commercial loans.

At the time, ANZ CEO Shayne Elliott said:

With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger more balanced bank for customers and shareholders.

This is a growth strategy for ANZ and we will continue to invest in Suncorp Bank and in Queensland for the benefit of all stakeholders.

One analyst puts ANZ as his least favourite big four ASX bank share. The Age quoted Jefferies Brian Johnson, who said:

Perhaps they’re too motivated by trying to have a bigger market share figure in housing than the shareholder value it creates.

You haven’t seen their market share improve. Their mortgage servicing is yet to actually improve, and they’ve abandoned their $8 billion cost target for 2024.

He also reportedly is “unimpressed” by ANZ Plus.

Time will tell whether the deal is approved by the ACCC and how much it adds (or not) to ANZ’s earnings per share (EPS).

In the recent ANZ FY22 third quarter update, it said revenue was up 5% in the three months to 30 June 2022, while the net interest margin (NIM) increased by 3 basis points and the underlying NIM improved by 6 basis points. Rising interest rates are expected to be “supportive” for margins in the fourth quarter, according to ANZ.

ANZ share price snapshot

Compared to a month ago, the ANZ share price is almost unchanged.

The post Why this analyst ranks ANZ shares at the bottom of the big-four-bank pile appeared first on The Motley Fool Australia.

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More reading

• Are ANZ shares really offering the highest dividend yield of the big four?
• Here are 2 ASX dividend shares that analysts are tipping as buys
• Could this pose a risk to the ANZ share price in the future?
• ANZ share price on watch following equity raising update
• Can ANZ’s latest acquisition help it catch up to the other ASX 200 bank shares?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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 been a rather pleasant day for ASX shares this Tuesday. The All Ordinaries Index (ASX: XAO) gained a robust 0.51% to close at 7,230.4 points. But let’s talk about one All Ords tech share that put the index to shame today.

The Archer Materials Ltd (ASX: AXE) share price was on fire today. Shares in the materials technology company closed 12.33% higher at 82 cents a share.

It comes after this ASX All Ords tech share closed at 73 cents yesterday and opened at that level this morning. Then, in early afternoon trading, Archer shares shot as high as 98 cents each, a gain of more than 34%.

So what’s going on with Archer Materials? It must be something big, seeing the company gained a third of its value in little over an hour…

Well, it seems that an ASX release put out around midday is responsible for these eye-watering moves.

The announcement revealed that Archer Materials has achieved its goal of “reliably” fabricating sub-10 nanometre semiconductor chips.

Back in May, Archer announced that it had achieved fabrication of 15nm chips. This benefitted the company’s shares at the time as well. But back then, Archer also flagged that it was working towards “breaking through the 10-nanometre barrier”.

Well, that’s what the company now appears to have achieved.

Archer Materials shares rocket on sub-10nm chip news

Here’s some of what the ASX release said:

Archer has now fabricated sub-10 nm features reproducibly and reliably by developing several advanced lithographic processes on a silicon wafer in a clean-room environment. The work is a significant technical achievement and represents a technology development breakthrough for the Company…

Archer’s sub-10 nm feature fabrication is in line with the current semiconductor industry best-in-class for chip feature sizes and provides the Company with a significant competitive advantage…

The extreme miniaturisation would give Archer greater flexibility, capability, and higher integration density in its lithographic processes for the design and fabrication of its technologies.

Archer CEO Dr Mohammad Choucair had this to say on the news today:

Achieving sub-10 nanometre fabrication of electronic device components is an excellent outcome on our path to developing Archer’s biochip technology, and one that demonstrates the world-class capabilities of our pioneering team.

Archer Materials now hopes to use this technological breakthrough to advance its ambitions to provide a ‘biochip’ that can detect “some of the world’s most deadly communicable diseases”.

At the closing Archer Materials share price on Tuesday, this ASX All Ords tech share has a market capitalisation of around $211 million.

The post Here’s why this ASX All Ords tech share rocketed 34% today appeared first on The Motley Fool Australia.

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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 NextDC Ltd (ASX: NXT) share price is having a tough week.

Despite releasing a strong full year result, weakness in the tech sector has dragged the data centre operator’s shares lower.

Is the NextDC share price weakness a buying opportunity?

According to a note out of Goldman Sachs, its analysts believe investors should be snapping up shares following recent weakness.

This morning its analysts have retained their conviction buy rating with an improved price target of $14.30.

Based on the current NextDC share price of $10.26, this implies potential upside of almost 40% for investors over the next 12 months.

What did the broker say?

Goldman was pleased with NextDC’s “solid” result and was even happier with its guidance for FY 2023. The broker commented:

NXT reported a solid FY22 result, with revenue/EBITDA -1% vs. GSe, but within/above its upgraded guidance range. Positively FY23 Rev/EBITDA guidance for +19%/+15% growth was provided, which was +1% vs. Gse.

Its analysts were also pleased to see that NextDC demonstrated good pricing power with its services, which helped offset inflationary pressures. It explained:

Other Positives: (1) Pricing power evident, with strong realized yields & 5-7% price rises introduced given inflation/power; (2) High yielding Enterprise momentum across all regions, with +3MW contracted growth in FY22, at top end of historical targets; (3) M2 Expansion to 100MW (from 60).

All in all, this has led to Goldman making small upgrades to its earnings estimates and its valuation. It concludes:

We revise NXT FY23-24 EBITDA +2%/+0% given stronger yields, offset by higher costs. Our 12m TP is +1% to $14.30. Stay Buy (on CL) ahead of the acceleration in growth following S3/M3 openings and supply chain normalization.

The post Goldman Sachs tips NextDC share price to rise 40% appeared first on The Motley Fool Australia.

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More reading

• Why Aussie Broadband, Grange, NextDC, and PolyNovo shares are being hammered
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Motley Fool contributor James Mickleboro has positions in NEXTDC Limited. 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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