There’s one group of ASX stocks that just got a big valuation boost by the analysts at Macquarie Group Ltd (ASX: MQG).
These are ASX nickel miners as the broker lifted its price forecast for the commodity due to growing demand from battery makers.
Nickel is a key ingredient in batteries that are used by electric car manufacturers, such as Tesla Inc (NASDAQ: TSLA).
The nickel price on supercharge
Traditional car makers are also joining the electrification rush. The world’s largest car maker, Volkswagen (VW), is on track to become a market leader, reported CNN.
VW sold 231,600 battery electric vehicles in 2020. While that’s less than half of what Tesla sold, it still represents a 214% increase over the previous year.
The price of electric cars are also dropping fast. Even Tesla is committing to building budget models that will narrow the gap between combustion engine and electric vehicles. Falling prices will be a major catalyst for mass adoption.
ASX nickel miners with the biggest upgrades
Macquarie boosted its FY21 and FY22 nickel price forecast by 7% and 8%, respectively. It also upgraded its medium-term assumptions with price increases of 11% to 13% for each of the following three years to FY25, when the nickel is tipped to fetch US$8.28 a pound.
This means significant valuation upgrades for ASX nickel producers. The Western Areas Ltd (ASX: WSA) share price sees the biggest uplift to its FY21 earnings forecast due to its large leverage to the nickel price.
Macquarie increased its earnings estimates on the miner by 106% for the current financial year and 182% in FY22.
Best ASX nickel stocks to buy
The broker’s price target on the WSA share price is boosted by 18% to $3.30 a share and it’s one of Macquarie’s favourite buys in the sector.
The other is the Nickel Mines Ltd (ASX: NIC) share price with Macquarie lifting its FY22 earnings forecast by 44% and FY23 forecast by 65%.
This sees the NIC share price target improve by 17% to $1.40 a share.
ASX nickel explorers to watch
But the stock that got the biggest valuation boost is the yet-to-turn-a-profit Panoramic Resources Ltd (ASX: PAN) share price.
Its price target got a 23% supercharge to 16 cents, although Macquarie prefers the Mincor Resources NL (ASX: MCR) share price among explorers. The broker would pick Mincor over Panoramic for the former’s development and exploration upside.
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Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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 Bruce Jackson.
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