Potential buys: 2 compelling ASX shares

Fortescue and Redbubble are two ASX shares that may be interesting buys…

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There are some compelling ASX shares that may be interesting to look at.

Businesses with big growth plans and a commitment to investing for growth may be good opportunities to consider.

Companies with large addressable markets or ones that operate in attractive industries can be solid ideas.

Here are two to think about:

Redbubble Ltd (ASX: RBL)

Redbubble is an e-commerce business that is currently rated as a buy by analysts at Morgans, with a price target of $4.84. That’s 33% higher than where it’s at right now.

It operates two leading global online marketplaces – Redbubble.com and TeePublic.com. On those sites, it sells products with uncommon designs on them that have been designed by artists. Product categories include apparel, stationery, housewares, bags, wall art and so on.

Redbubble says it’s uniquely positioned to be a significant winner in an addressable market of around US$300 billion. By 2024, that total addressable market is expected to rise to US$400 billion.

The ASX share is investing to achieve growth and reach annual marketplace revenue of US$1.25 billion in the next few years.

There are several trends that Redbubble believes is helping the business. These include structural shifts to e-commerce that are expected to endure, increasing consumer demand for unique and meaningful products, and a growing creator economy which enables scalable, dynamic source of unique designs.

Management is confident about the longer-term opportunity to grow strongly and see a growing earnings before interest, tax, depreciation and amortisation (EBITDA) margin from scale benefits from areas like fulfilment scale efficiencies.

Redbubble has also acknowledged that it’s looking for acquisition opportunities that will help accelerate its growth.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of the largest iron ore miners on the ASX.

The brokers at Macquarie Group Ltd (ASX: MQG) currently rates Fortescue as a buy, with a price target of $21. That’s a potential upside of around 35% over the next 12 months.

Macquarie thought the quarterly performance by the ASX share for the three months to 30 September 2021 was good. Fortescue reported that the first-quarter iron ore shipments of 45.6 million tonnes (mt) were 3% higher than the first quarter of FY21. C1 costs of US$15.25 per wet metric tonne (wmt) were in line with the previous quarter.

The broker also noted the progress of Fortescue Future Industries (FFI), which is the ASX share’s green segment. It aims to take a global leadership position in the renewable energy and green products industry. FFI has a vision to make green hydrogen the most globally traded seaborne commodity in the world.

Recently, Fortescue Future Industries said it’s going to construct a global green energy manufacturing (GEM) centre in Gladstone, Queensland. The first stage of development is an electrolyser factory with an initial capacity of two gigawatts.

The GEM has just received planning approval from the Queensland Government.

FFI also said the GEM will be the first step in a series of projects that will continue to transform regional Australia through green industry manufacturing and energy production centres.

The initial electrolyser investment is expected to be up to US$83 million, with the first electrolysers scheduled for production in early 2023.

Looking at the FY23 estimates, the Fortescue share price is valued at 8x FY23’s estimated earnings with an FY23 grossed-up dividend yield of 13%.

Should you invest $1,000 in Fortescue right now?

Before you consider Fortescue, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Fortescue wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Tristan Harrison owns shares of Fortescue Metals Group 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 owns shares of and has recommended Macquarie Group Limited. 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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