If you’re looking for blue chip shares to buy, then you may want to consider the two listed below that brokers are bullish on.

Here’s what you need to know about these blue chips:

Cochlear Limited (ASX: COH)

The first ASX blue chip share for investors to look at is Cochlear. It is one of the world’s leading hearing solutions companies.

Goldman Sachs is positive on the company, particularly given its improving outlook. In fact, the broker suspects that Cochlear could outperform its guidance in FY 2022.

Goldman commented:

We believe the steady declines in [COVID] hospitalisation rates across key markets, supportive backlog volumes and improved margin trajectory support a much improved picture from here.

As such, we believe current targets for FY22 offer the best chance in several years for COH to deliver at/above the top-end of its guided range (GSe: A$297m).

The broker currently has a buy rating and $237.00 price target on Cochlear’s shares. Based on the current Cochlear share price of $195.16, this implies potential upside of 21% for investors.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another blue chip ASX share that brokers say investors should buy is pizza chain operator Domino’s.

Analysts at Morgans are particularly bullish on the company due to its bold store rollout plan. This sees Domino’s aiming to increase its store network to 6,650 stores by 2033, which will be more than double its current network.

Morgans also likes the company due to its defensive qualities in tough times. Though, it concedes that that the near term could be challenging. It explained:

Demand for DMP’s product is likely to remain resilient in times of inflation and slower economic growth. Takeaway food has been one of the most resilient categories of consumer spending during periods of rising inflation. The engine of DMP’s growth is the rollout of new stores.

Although near-term store rollout may be slower than DMP would like, the medium-term opportunity is absolutely undiminished, as evidenced by the reiteration of the 2033 outlook today. DMP has developed a solid platform for inorganic expansion.

The broker has an add rating and $93.00 price target on its shares. Based on the current Domino’s share price of $66.15, this suggests potential upside of 40% for investors.

The post Experts say investors should buy these top blue chip ASX shares appeared first on The Motley Fool Australia.

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More reading

• Own Domino’s shares? Here’s how the company plans to grow through tough times
• 2 beaten down ASX shares named as buys by experts
• Analysts name 2 top ASX 200 shares to buy today
• Down 20% in a year, is the Cochlear share price a bargain buy?
• Experts rate these ASX 200 blue chip shares as buys

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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Dominos Pizza Enterprises 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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While ASX equity and credit markets deal with one of the worst starts to the year on record, it’s been an entirely different story over in investment banking land.

Mergers and acquisitions (M&A) activity has nudged past a number of records in the first half of 2022, according to data compiled by Refinitiv.

Fees alone are up 78% on the prior corresponding period, and deal volume was the highest on record.

Crunching the record numbers

M&A activity blew to new heights in the first half of 2022, according to data presented in the Australia Investment Banking Review First Half 2022 from Refinitiv.

There have been at least four deals announced so far above US$5 billion with a cumulative value of $52 billion, as of June 21.

Data compiled by Refinitiv showed it was a record period for Australia on many fronts.

Overall Australian involvement announced M&A activity amounted to US$103.5 billion in the first half of 2022, a 25.4% increase compared to the first half of last year, making it the highest first-half period since records began in 1980.

The ASX healthcare sector accounted for 23% market share of the deal-making activity by value and totalled US$24.2 billion.

This was underlined by the US$22.1 billion takeover bid for Ramsay Health Care Limited (ASX: RHC) by a consortium led by private equity giant KKR.

It is currently the biggest-ever healthcare deal in Australia, Refinitiv notes.

The energy and power sector followed with 16.6% market value, booking US$17.2 billion of deals, up 26.3% from H1 FY21.

What the report calls “high technology” saw the most number of deals, but captured 13.6% of deal market share.

“Based on preliminary data, Barclays currently leads the Australian involvement announced M&A league tables, with US$36.1 billion in related deal value capturing 34.9% market share,” Refinitiv also said.

Inbound M&A activity is also up 74% from last year, primarily from capital flows from the US. Meanwhile, there are several deals still pending, with only two showing completed on the data provider’s slide deck.

Nevertheless, it shows there’s been a spike in deal-making in Australia at the top end of town, suggesting the outlook for Australia might be quite robust, all things considered.

The post 2022 has seen a record first half for ASX mergers and acquisitions. Here’s the lowdown appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care 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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In my opinion, the Adore Beauty Group Ltd (ASX: ABY) share price is too good to ignore at its current level.

The beauty e-commerce business has seen a very large sell-off – it’s down by more than 70% in 2022.

Plenty of ASX growth shares have seen valuation pain amid inflation and interest rate rises.

While higher interest rates do theoretically pull down on asset prices, I think Adore Beauty has been punished too hard.

I believe there’s a beautiful opportunity here, not just because of the decline but also due to a number of positives for the company.

Revenue

While revenue isn’t the same as profit, I think it’s important to recognise that Adore Beauty is processing a lot of online orders these days, particularly after the e-commerce adoption arising from the COVID-19 lockdowns.

In the latest quarter alone (the FY22 third quarter), Adore Beauty achieved $42.7 million of revenue. This was up 9% year on year.

While the growth rate has slowed, it did still achieve good year-on-year growth in my opinion.

There’s an argument that Adore Beauty’s products could be more defensive than some discretionary spending items. The Adore Beauty CEO Tennealle O’Shannessy said:

Beauty, especially skincare, is unique within the broader retail market and is resilient to economic challenges. Our products are used daily by customers, who consider these items essential and frequently re-purchase. The nature of premium beauty means our customers spend more as they mature on the platform, with returning customers typically contributing more than 70% of total revenue.

Growth initiatives

Over the long term, I think Adore Beauty can continue to grow. It’s the potential growth of the business that makes me believe that it’s currently undervalued.

Firstly, the number of active customers keeps rising. If it can increase its customer base, retain customers, and encourage them to spend more (on Adore Beauty’s website) over a year then that will benefit the ASX share.

In the FY22 third quarter, the company said active customers went up 7% year on year to 880,000, while returning customers increased 47%.

In the FY22 half-year result, annual revenue per active customer rose 5% year on year to $224. I think returning customers spending more will be a key factor for the Adore Beauty share price over time.

Its mobile app now accounts for 10% of revenue and continues to deliver “elevated levels” of engagement, conversion and average order values, according to the company. The launch of its “first” private label products can also help grow, which will hopefully come with higher gross profit margins as well.

The company has a number of podcasts to connect with customers, for a cheaper cost than paid market channels. It also has its own YouTube channel.

Adore Beauty points to successful partnerships with Temple & Webster Group Ltd (ASX: TPW) and 7-Eleven to increase brand awareness.

It’s operating in a “large and growing $11 billion market”, giving a large addressable market to work with.  In 2020, 11.4% of the Australian beauty market was online. That compares to 18.4% in the UK in 2020, so there is potential for a large increase in online adoption.

Increasing scale to help operating leverage

The company is aiming to invest heavily to achieve above-market growth. That’s why its earnings before interest, tax, depreciation and amortisation (EBITDA) margin is expected to be between 2% and 4% in the shorter term.

Adore Beauty itself said that:

In the longer-term, as the business grows, scale benefits are expected to increase operating leverage and deliver further EBITDA margin expansion.

In HY22, the business saw its gross profit margin increase 0.6 percentage points to 33.1% thanks to product margin expansion and brand funding.

The company said that as it grows it will be able to slow its investment in fixed costs, it can forge closer relationships with brands to optimise terms and increase brand funding, and it plans to grow its margin-accretive private label.

The post Why I think the Adore Beauty share price is a great buy today appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited and Temple & Webster Group 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 Santos Ltd (ASX: STO) share price closed down 1.77% at market close on Friday on no news. It now rests at $7.22.

In broad market news, the S&P/ASX 200 Energy Index (ASX: XEJ) finished 1.45% down on Friday, extending its losses to 6% for the past week.

Fundies still say Santos is a buy

The oil and gas trade continues to wind up and those managing investor capital are bullish on Santos.

“It’s a buy from us,” said Luke Smith from Ausbil Investment Management when speaking to Livewire.

“We’re bullish on both oil and gas. Santos, for us, is the preferred way to play that in the Australian space. [It] has lagged the commodity for some time,” he added.

He reckons the market should start to appreciate Santos’ free cash flow growth and reflect that in share price gains.

“I [also] think ultimately the capital management will force the market to take heed to how much cash is being generated by this business,” he remarked.

Meanwhile, Tom Richardson from Paradice Investment Management is bullish on Santos as well.

Richardson said he was surprised at “how little this stock had done” with being an oil and gas play, also speaking to Livewire.

“[I]t’s just they need to see the cash,” he added. “I think that’s inevitable with Santos. As much as development optionality they’ve got, there’s going to be a lot of cash coming back to shareholders and the share price will reflect it.”

The Santos share price has spiked 14% this year to date despite reversing down 12% in the past month of trade. Over the past year, it is flat.

The post ‘Need to see cash’: Why these fundies tip big things for the Santos share price appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Thursday
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• Why did the Santos share price sink 6% today?

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

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