This month has been a particularly volatile period for ASX shares but some of the worst performers could see a rebound in June.
For one, risk appetite appears to be improving again in the last week or so. This means investors could be in a more forgiving mood as they hunt for bargains.
And what better place to look for value stocks than among ASX shares that have been punished for issuing bad news in May?
Returning to growth
Mind you, not all of May’s ASX sinners are worth a second glance. However, Goldman Sachs reckons the Costa Group Holdings Ltd (ASX: CGC) share price could be one to back.
The fruit and veggies grower is one of the worst performers on the S&P/ASX 200 Index (Index:^AXJO) for the month. Just about all of its losses came in the last two trading days when it warned that labour shortages and weak prices for some of its produce will weigh on its bottom line.
The update triggered a more than 20% crash in the Costa Group share price. But Goldman is urging investors to buy the stock now as it believes the sell-off is an overreaction.
Buy the dip
“The business is well positioned over the medium term. Expansion of international operations is the key growth driver in the business,” said the broker.
“We forecast China/Morocco to contribute 36% to Group EBITDA by FY23 (vs. 17% in CY19).”
Goldman reiterated its “buy” recommendation on the Costa Group share price with a 12-month price target of $4.85 a share.
Catching a breath
Another laggard with a bright medium-term outlook is the Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price. The medical device maker shed more than 13% in the past week and is down 18.4% in the month.
Earnings disappointment was the trigger for the sell-off but Goldman believes the mid to longer-term prospects remains positive.
Stronger earnings ahead
“Whilst we had factored a sequential slowdown to reflect the decline in hospitalisations, we had under-estimated the extent,” said Goldman.
“We re-base our consumables forecasts to reflect this lower exit-rate, driving -8-10% revisions to our FY22-25E sales forecasts. The other negative surprise to us today was that air freight costs appear set to remain elevated for some time (currently running at 2x ‘pre-pandemic’ levels).”
But the broker’s earnings before interest, tax, depreciation and amortisation (EBITDA) forecast for FY22 through FY25 are still 4% to 12% above COVID-19 levels.
Goldman is recommending the Fisher & Paykel share price as a “buy” with a price target of $33 a share.