Tag: Motley Fool

Westpac Banking Corp (ASX: WBC) shares are in the green today.

The S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for $23.45. In morning trade on Tuesday, shares are swapping hands for $23.55 apiece, up 0.4%.

For some context, the ASX 200 is up 0.2% at this same time.

Westpac shares have been off to a strong start in 2024, currently up 2.8% since the closing bell on 29 January. That’s a good sight better than the 1.3% year to date loss posted by the ASX 200.

And according to the analysts at Macquarie, Westpac shares look well-placed to outperform their banking peers.

Why did Westpac shares get an upgrade?

Commenting on Macquarie’s upgrade of Westpac shares to an ‘outperform’ rating, analyst Victor German said (quoted by The Australian), “We believe WBC issues are becoming well understood and more appropriately reflected in consensus numbers.”

German cited the large downgrades in FY 2023 as reducing the risk to earnings.

He added:

We expect WBC to benefit more than peers from its replicating portfolio, given less of the benefits have been captured to date, offsetting headwinds from deposit mix changes and higher term deposit pricing.

On a normalised basis, German said Westpac shares are now the cheapest among the ASX bank stocks “after incorporating through the cycle impairment changes”.

According to German, one of the red flags to keep an eye on in 2024 is Westpac’s ongoing and potentially costly franchise issues, which could take some time to resolve.

The bank is also vulnerable to competition which could pressure its margins and see it lose some of its market share.

Still, Macquarie increased its target price by 17% to $24 a share.

That’s 2% above the current level. And it doesn’t incorporate the two fully franked dividend payments that Westpac will (quite likely) pay out over the coming year.

How has the ASX 200 bank performed longer term?

Westpac shares remain down 1.3% over the past 12 months. The ASX 200 bank stock has gained 12.4% over two years.

The post Why this top broker just upgraded the outlook for Westpac shares appeared first on The Motley Fool Australia.

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More reading

• If you’d bought $10,000 of Westpac shares in January 2022, here’s what you’d have now!
• What will my ASX 200 bank stocks be worth in 5 years?
• 3 things ASX investors should watch this week
• Here’s how much I’d need to invest in Westpac shares for $3,000 a year in passive income
• The Westpac share price heavily underperformed the ASX 200 in 2023

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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If you’re looking for some mining sector exposure, then it could be worth checking out the two ASX 200 mining shares listed below.

That’s because Goldman Sachs has just put buy ratings on both of these shares. Here’s what the broker is saying:

Lynas Rare Earths Ltd (ASX: LYC)

According to the note, Goldman Sachs has a buy rating and trimmed price target of $7.50 on this rare earths producer’s shares. This implies potential upside of 28% for investors over the next 12 months.

The broker likes the ASX 200 mining share so much that it has it on its coveted conviction list. Its analysts highlight the company’s attractive valuation, the positive outlook for rare earths, and its production growth plans as reasons to buy. It explains:

Undervalued: the stock is trading at ~0.8x NAV (A$7.71/sh) and pricing in US$67/kg NdPr vs. spot at ~US$55/kg and our long run US$83/kg (real $, from 2028) NdPr price forecast. NdPr market balanced over medium term but deficits over long run on higher Chinese supply, but we see upside to current NdPr spot China at ~US$55/kg where we forecast US$75/kg across CY24 based on our SD model. Doubling NdPr production, LYNAS 2025 target (12ktpa NdPr) likely delivered in 2026 but could be upsized to >12ktpa NdPr (not in base case) based on the Mt Weld resource, possible third party feed, and ongoing supportive global government policy:

South32 Ltd (ASX: S32)

Another ASX 200 mining share that has been given the seal of approval by Goldman is South32.

Its analysts have a buy rating and $3.80 price target on its shares. This implies potential upside of 20% for investors from current levels.

The broker is feeling positive on the company due to the favourable outlook for a number of commodities that it produces. It said:

GS bullish copper, aluminium, zinc and met coal (~65% of S32 NTM EBITDA): leading to improving FCF in 2H FY24 FY25 (yield of ~10%) and forecast strong recovery in S32’s EBITDA (+50%) in FY25. In addition, we are bullish on the alumina market with forecast pricing over 2024/2025 of US$375/380/t based on the full curtailment of Kwinana, and we expect San Ciprian and other western world refineries to close, based on our cost curve analysis.

The post Goldman Sachs says these ASX 200 mining shares can rise 20%+ appeared first on The Motley Fool Australia.

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More reading

• Is the Lynas share price set to rise 60% in 2024?
• 5 things to watch on the ASX 200 on Tuesday
• South32 share price falls after disappointing December update
• Lynas share price sinks alongside 50% quarterly revenue fall
• How I invest and make money from ASX mining shares

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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Judo Capital Holdings Ltd (ASX: JDO) shares are rebounding very strongly from yesterday’s selloff.

In morning trade, the ASX All Ords small business lender’s shares are up 14% to $1.13.

Why is this ASX All Ords stock jumping today?

Investors were hitting the sell button on Monday after analysts at Citi downgraded Judo Capital’s shares all the way from a buy rating to a sell rating.

The broker made the move on the belief that the market was expecting far too much from the company in FY 2025.

However, an update from the ASX All Ords stock today appears to suggest that those expectations may not be as outlandish as Citi believed based on its performance so far in FY 2024.

According to an update this morning, Judo Capital expects to release a half year result that is ahead of consensus estimates.

It notes that its unaudited profit before tax (PBT) was $67 million for the first half, which is up 24% on the prior corresponding period. Management advised that this was driven by continued above-system lending growth, strong net interest margins, continued investment in growth, and minimal write offs.

In respect to lending, Judo achieved net lending growth of ~$800 million for the six months, which represents approximately three times system business credit growth. This was achieved with a net interest margin of 3.02%.

Second half guidance

Looking ahead, the ASX All Ords stock expects more of the same in the second half. It is forecasting a second half PBT of $40 million to $45 million, resulting in FY 2024 PBT of $107 million to $112 million.

And while it is expecting its net interest margin to soften to between 2.85% and 2.90% for the 12 months, it believes the second half will mark a trough in margins.

Finally, looking to FY 2025, Judo is targeting profit growth of 15% or higher for the financial year.

The post Guess which ASX All Ords stock is surging 14% on soaring profit appeared first on The Motley Fool Australia.

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More reading

• Why is the Pilbara Minerals share price rebounding on Tuesday?
• This 5%-yielding ASX 200 dividend giant looks like a hidden gem to me
• Is the Lynas share price set to rise 60% in 2024?
• The Zip share price has soared 147% in 3 months, can it keep going?
• Why this broker thinks you should be selling Fortescue shares

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Judo Capital. 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 Pilbara Minerals Ltd (ASX: PLS) share price is fighting hard to rebound from yesterday’s weakness.

In morning trade, the lithium miner’s shares are up 2% to $3.40.

Investors were selling Pilbara Minerals and other ASX lithium shares yesterday after a bleak update from Liontown Resources Ltd (ASX: LTR) sent shockwaves through the industry.

This latest decline by the Pilbara Minerals share price means that it was down over 15% in the space of a month prior to today’s session.

Why is the Pilbara Minerals share price rising?

With no news out of the company, it seems that some investors are buying shares today on the belief that its shares have been oversold.

One broker that would likely agree with this view is Macquarie. Last week, its analysts retained their outperform rating with a $4.40 price target.

This implies potential upside of approximately 30% for investors over the next 12 months.

And while the broker is expecting another dividend to be paid in FY 2024, it’s not going to be anything to get excited about unfortunately.

Macquarie is now forecasting a paltry 1 cent per share dividend for the year. This is less than a half a percent dividend yield based on today’s Pilbara Minerals share price.

The post Why is the Pilbara Minerals share price rebounding on Tuesday? appeared first on The Motley Fool Australia.

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More reading

• Here’s the lithium price forecast through to 2027
• Why has the Pilbara Minerals share price just tanked 6%?
• Mineral Resources shares tumble 9% on unfavourable broker rating
• How I invest and make money from ASX mining shares
• These are the 10 most shorted ASX shares

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 Macquarie Group. The Motley Fool Australia has positions in and 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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Sonic Healthcare Ltd (ASX: SHL) is an S&P/ASX 200 Index (ASX: XJO) dividend giant, which looks like a hidden gem in my opinion.

How big is the Sonic Healthcare business? It has a market capitalisation of almost $15 billion, according to the ASX. It’s one of the larger businesses on the ASX, though it’s not quite as large as a company like Woolworths Group Ltd (ASX: WOW) and Telstra Group Ltd (ASX: TLS).

What does Sonic Healthcare do?

It’s best-known as being a global pathology business. In other words, it’s an ASX healthcare share that helps healthcare professionals test patients and figure out what’s wrong.

Sonic Healthcare has sizeable operations in a number of countries including the US, Australia, Germany, the UK, Switzerland, Belgium and New Zealand.

The business also has a large radiology division which made $796 million of revenue in FY23. In total, this ASX 200 dividend giant made total revenue of $8.17 billion last financial year.

Why it’s a dividend leader

The business has been paying a dividend for a number of decades and it increased the dividend most years. Indeed, the company’s leadership has a progressive dividend policy. In other words, the board of directors want to grow the dividend for shareholders, if possible.

There are very few businesses on the ASX that have grown their dividend as frequently as Sonic Healthcare over the last two decades.

The ASX 200 dividend giant is not guaranteed to grow its dividend every year, but I think being in the healthcare sector means the business is defensive enough to perform for income-focused shareholders every year.

It’s growing profit with organic growth – it’s benefiting from the ageing population tailwind as well as growing populations. Sonic Healthcare also has been steadily making acquisitions, increasing its scale in Australia, the US and Europe.

Sonic Healthcare is also investing in AI, which could help the company’s operations and margins in the future.

Dividend yield

In FY23, the business paid a dividend per share of $1.04. That translates into a trailing grossed-up dividend yield of 4.7%.

According to Commsec, the business could pay a dividend per share of $1.071. If it did pay that, this would translate into a forward grossed-up dividend yield of close to 5%.

While it’s not the biggest yield around, I like the history of reliability and growth that this ASX 200 dividend giant has offered.

The post This 5%-yielding ASX 200 dividend giant looks like a hidden gem to me appeared first on The Motley Fool Australia.

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More reading

• Here’s why brokers are very bullish on these ASX 200 blue-chip shares
• Weathering market storms: Dividend stocks in Australia as a safe harbour
• One ASX dividend giant I’d buy over CBA shares for 2024
• Dividend investing: A proven path for Australian income seekers
• Got a lot of cash? Here’s why I’d start investing it in ASX shares in 2024

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 positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Sonic Healthcare. 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 Lynas Rare Earths Ltd (ASX: LYC) share price is down 33% over the past 12 months. But, the ASX mining share could be one stock that delivers a rebound, according to an expert.

As the name suggests, this company is involved in mining what’s called ‘rare earths’. It’s the only major rare earth miner outside of China. Lynas points out rare earths are “essential inputs to​ high growth global manufacturing supply chains, including digital age technologies and green technologies such as electric vehicles and wind turbines.”

What’s gone wrong?

The second quarter of FY24 showed, financially, why investors aren’t as excited as a year ago. FY24 second quarter sales revenue was A$112.5 million, down from A$232.7 million in the FY23 second quarter, and down from A$128.1 million in the first quarter of FY24.

Its closing cash and short-term deposit are down to around $686.1 million at the end of December 2023, down from around $900 million three months before and a year before.

The average selling price for its production in the FY24 second quarter was A$28.7 per kilo, down from A$58.4 per kilo in the FY23 second quarter.

Is the Lynas share price an opportunity?

The broker UBS seems to be quite excited about the opportunity presented by the rare earth miner.

UBS has a price target of $9.20 on the rare earth miner, which suggests a possible rise of around 60% over the next 12 months.

The broker recently noted Lynas was issued with a variation of its Malaysian operating license, “importantly allowing it to continue cracking and leaching at its facility.” UBS thinks Lynas is more likely to hit its guidance on the ramp-up of the downstream post-expansion now that cracking and leaching are not an issue.

The broker is optimistic about how much Lynas can produce in the coming years – more than Lynas’ 2025 growth targets, and UBS thinks the approval can allow the business to hit its medium-term and long-term goals faster. It thinks Lynas can provide around 14kt per annum from FY27, assuming the license approval is extended again after 2026 which is when it expires.

UBS notes that Lynas is investing heavily in FY24 with the mine expansion, but it has a lot of cash to fund this.

There are three key reasons why UBS is positive about the Lynas share price. First is the miner’s “market-leading” position in the rare earth space. Second, Lynas has “increasing capabilities as a processor of third-party feedstock.” Third, there are “potential tailwinds from a government/funding perspective”.

However, the broker is “hearing mixed signals” about the price outlook for the commodity. It’s expecting NdPr demand growth of 25% in 2024 and slowing China NdPr quota growth, as well as consolidation of Chinese NdPr producers. But, on that final point, UBS is hearing Chinese domestic rare earth producers aren’t yet showing “supply discipline that was previously anticipated (to maintain market share).”

Valuation snapshot

Since the start of 2024, the Lynas share price is down 18%.

The post Is the Lynas share price set to rise 60% in 2024? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Lynas share price sinks alongside 50% quarterly revenue fall
• How I invest and make money from ASX mining shares
• The 8 ASX mining stocks Goldman Sachs says are buys in 2024
• Brokers name 3 ASX shares to buy now

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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The Zip Co Ltd (ASX: ZIP) share price has rocketed 147% over the past three months. In that same time period, we’ve seen the S&P/ASX 200 Index (ASX: XJO) go up by 8.3%.

With that level of return, past performance is definitely not a guarantee of future returns over the next three months. I wouldn’t expect returns of 100% in the next year or even the next five years.

The buy now, pay later business is facing a number of headwinds, including significantly higher interest rate costs, a reduced global growth runway following exits from multiple countries, increased regulation and a customer base facing challenging economic conditions.

Those are major problems, and risks, and I think it largely justifies the massive decline for the Zip share price we’ve seen over the past couple of years. It’s down over 90% from its peak in February 2021.

But, it’s not all bad news. There are a few positives that could help send the Zip share price higher.

Ongoing growth

Despite all of the problems that are happening for the ASX buy now, pay later share, the company is still delivering good top-line growth.

The latest we’ve heard from Zip is the quarter for the three months to December 2023, which saw transaction volume growth of 8.5% year over year to $2.8 billion. Transaction numbers for that quarter rose 4.1% year over year.

The company’s revenue margin improved from 7.1% in the second quarter of FY23 to 8.2% in the second quarter of FY24.

This led to group quarterly revenue of $225.6 million, which is an increase of 26.1% year over year.

In the FY24 second quarter, a number of key enterprise merchants launched during the period, including Amaysim, Bang & Olufsen, National Geographic and RM Williams. In the US, it announced a partnership with Google Pay, which went live in January.

Improving profitability

Being profitable didn’t seem to be a key focus for Zip during the 2010s as it looked to grow rapidly.

Zip’s scale has now reached a level where it’s a lot easier to make a profit. These days, the company is focused on making a profit, with the high interest rate environment making this goal even more important.

In the update for the three months to December 2023, the company said its cash transaction margin improved to 3.5%, up from 2.8% in the FY23 second quarter. It also pointed out that US bad debts “continued to perform well,” with the monthly cohort loss rates being approximately 1.3% to 1.4% of the total transaction value (TTV), which was below its target range of between 1.5% to 2%.

I think making profit will be key for the Zip share price from here..

It’s expecting to achieve positive group cash earnings before tax, depreciation and amortisation (EBTDA) in the second half of FY24 and for the whole FY24.

Sorted out the balance sheet

Zip announced in mid-December that it had completed new funding facilities to strengthen its balance sheet, simplify the capital structure and support ongoing profitable growth.

It executed an agreement for a new $150 million corporate debt facility which refinanced its existing corporate debt of $90 million.

Zip has worked hard to reduce the value of convertible notes on its balance sheet.

The business has refinanced its receivables funding in both the US and Australia as well.

Final thoughts on the Zip share price

Zip is doing the right things to grow its business during this difficult period. It could recover more if it reaches profitability in terms of the net profit, and proves it can make money sustainably, but it’s not the type of business I’d want to own in my own portfolio.

The post The Zip share price has soared 147% in 3 months, can it keep going? appeared first on The Motley Fool Australia.

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More reading

• Why 4DMedical, A2 Milk, QBE, and Zip shares are charging higher today
• Zip shares rocket 17% on ‘outstanding’ quarter
• Why Atlantic Lithium, Charter Hall, Droneshield, and Zip shares are pushing higher
• Why Arcadium Lithium, IAG, PYC Therapeutics, and Zip shares are falling today

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 Zip Co. 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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Now could be the time to take profit on Fortescue Ltd (ASX: FMG) shares.

That’s the view of analysts at Bell Potter, which are tipping the iron ore miner’s shares to fall meaningfully from current levels.

What is the broker saying about Fortescue shares?

According to the note, the broker has reiterated its sell rating with an improved price target of $21.39.

Based on where Fortescue shares currently trade, this implies potential downside of 23% for investors over the next 12 months.

This bearish stance is based on the broker’s belief that Fortescue’s earnings and dividends will be in decline after FY 2024 as iron ore prices soften. It explains:

At this stage, FMG remains a pure-play iron ore exposure and its earnings, dividends and valuation are all highly leveraged to the iron ore price. Recent positive Final Investment Decisions (FIDs) have provided some transparency on projects and technologies being pursued by FMG’s Energy division, but these are small-scale in comparison with the iron ore business and some years away from production and revenue generation.

Our iron ore price increases result in earnings upgrades of 22%, 57% and 37% and DPS increases of 21%, 56% and 33% for FY24, FY25 and FY26 respectively. While our higher iron ore price forecast results in earnings upgrades, we still model declines in earnings and dividends over our forecast period.

Bell Potter is now forecasting earnings per share of $2.69 in FY 2024, $1.65 in FY 2025, and then $1.41 in FY 2026.

It concludes:

EPS changes in this report are: FY24: +22%, FY25: +57%; and FY26: +37%. Our NPV-based valuation is increased by 23% from $17.37/sh to $21.39/sh. While we have upgraded our prices on unexpectedly supportive factors we still see low growth in global steel demand and a deteriorating pricing environment. Dividend yield as a price support is coming back into play but we retain our Sell recommendation.

The post Why this broker thinks you should be selling Fortescue shares appeared first on The Motley Fool Australia.

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More reading

• ASX 200 mining stocks underperforming as Andrew Forrest shutters WA nickel mines
• How I invest and make money from ASX mining shares
• 2024 could be the biggest year in history for the Fortescue share price. Here’s why!
• 3 ASX shares I think are ready for dividend hikes in 2024
• Top broker Citi lifts its Fortescue share price forecast

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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It certainly has been an incredibly tough time for ASX lithium stocks.

The likes of Core Lithium Ltd (ASX: CXO), IGO Ltd (ASX: IGO), Liontown Resources Ltd (ASX: LTR), and Pilbara Minerals Ltd (ASX: PLS) have fallen heavily in recent months in response to lithium price weakness.

The declines have been so brutal that Core Lithium recently announced plans to suspend production, IGO is deferring sales, and Liontown had a $760 million funding package cancelled by its lenders.

In light of this, investors will no doubt be wondering when the lithium price rout will finally be over.

Well, let’s see what Goldman Sachs is saying this week about lithium prices.

Lithium price forecast

As a reminder, Goldman Sachs has been spot on about lithium prices over the last 18 months, correctly calling this collapse when others in the industry were adamant that demand would keep prices high. So, clearly it can pay to listen to what its analysts say about the price of the battery making ingredient.

Moving on, here’s how spot prices are looking this week compared to the average of last year:

• Lithium carbonate – China: US$11,867 per tonne (2023 average: US$32,694)
• Lithium hydroxide – China: US$9,899 per tonne (2023 average: US$32,452)
• Spodumene 6%: US$1,000 per tonne (2023 average: US$3,712)

But where next from here? Let’s see what Goldman is forecasting for lithium prices out as far as 2027.

Lithium carbonate – China:

• 2024: US$12,847 per tonne
• 2025: US$11,000 per tonne
• 2026: US$13,323 per tonne
• 2027: US$15,646 per tonne

Lithium hydroxide – China:

• 2024: US$13,795 per tonne
• 2025: US$12,500 per tonne
• 2026: US$14,323 per tonne
• 2027: US$16,146 per tonne

Spodumene 6%:

• 2024: US$1,175 per tonne
• 2025: US$800 per tonne
• 2026: US$978 per tonne
• 2027: US$1,155 per tonne

The post Here’s the lithium price forecast through to 2027 appeared first on The Motley Fool Australia.

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More reading

• Broker tips 70% return for Liontown shares after selloff
• 5 things to watch on the ASX 200 on Tuesday
• Why has the Pilbara Minerals share price just tanked 6%?
• Why Appen, Baby Bunting, Cooper Energy, and Liontown shares are sinking today
• Mineral Resources shares tumble 9% on unfavourable broker rating

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.

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Liontown Resources Ltd (ASX: LTR) shares had a terrible time on Monday.

The lithium developer’s shares crashed as much as 26% to a 52-week low of 89 cents after releasing an update on its Kathleen Valley Lithium Project in Western Australia.

That update revealed that the company has commenced a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital. It also revealed that a recently announced $760 million debt funding package had been terminated by its lenders.

Both actions were in response to weak lithium spodumene prices.

The Liontown share price would go on to recover a touch before closing the day 21% lower at 94 cents.

Should you buy Liontown shares?

The team at Bell Potter believes that this could be a buying opportunity for investors with a high risk tolerance.

This morning, the broker has retained its speculative buy rating on its shares with a reduced price target of $1.60 (from $2.25).

Based on where Liontown shares closed yesterday’s session, this implies 70% upside for investors over the next 12 months.

What did the broker say?

In respect to the funding, Bell Potter believes a new $500 million funding package would be sufficient. It said:

LTR’s previous funding package allowed for a cash liquidity buffer of A$350m. We expect that through a combination of reducing this buffer and deferring expansion capex, LTR can maintain sufficient funding for Kathleen Valley’s completion and commissioning on debt funding of around A$500m (from A$760m). Near-term lithium prices and LTR’s cost profile during ramp-up remain a key risk. However, we also expect other forms of strategically aligned finance may be available, if required.

In addition, the broker highlights that it remains very positive on the Kathleen Valley Lithium Project and sees it as a highly strategic operation. It commented:

We have reduced our LTR valuation to $1.60/sh (previously $2.25/sh) to account for heightened funding risks. LTR’s 100% owned Kathleen Valley lithium project remains highly strategic in terms of its stage of development, long mine life and location. LTR has offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and Tesla). Hancock Prospecting has a 19.9% interest in LTR.

The post Broker tips 70% return for Liontown shares after selloff appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why Appen, Baby Bunting, Cooper Energy, and Liontown shares are sinking today
• Mineral Resources shares tumble 9% on unfavourable broker rating
• Why are Liontown shares crashing 26% on Monday?
• These are the 10 most shorted ASX shares

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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