2 beaten-up blue chip ASX shares rated as buys

Could these beaten-up blue chips, like TPG, be buys?

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Some blue chip ASX shares have been beaten up in recent weeks and months. But could that mean they have fallen enough to be buys?

Just because a business is large or called a blue chip doesn’t mean that it can’t go through some volatility, as the market has seen with some of the ASX shares that are mentioned below.

However, a decline in a share price can turn a business into an opportunity if it still has long-term potential.

With that in mind, here are two ASX blue chips that could be possibilities after their declines:

TPG Telecom Ltd (ASX: TPG)

TPG is one of the largest telecommunication companies in Australia with brands like TPG, Vodafone and iiNet in its stable.

The TPG and Vodafone Australia businesses went through a long process of trying to merge so that the combined business could better compete with peers like Telstra Corporation Ltd (ASX: TLS).

This merger is expected to lead to significant synergies, give the ability to give better service to customers and provide stronger financial returns to shareholders.

TPG is expecting to beat its 5G rollout target of 85% population coverage in the top six cities in 2021, by reaching the milestone in four additional regions: the Gold Coast, Sunshine Coast, NSW Central Cost and in Wollongong.

The ASX blue chip share is aiming to achieve $70 million of synergies in 2021 thanks to the merger, excluding home wireless and revenue synergies.

It’s also undertaking a review of its telco tower assets. TPG operates a mobile network of 5,800 rooftops and towers and owns the passive infrastructure on around 1,200 of those sites which are predominately in metro areas. It could choose to monetise those assets.

TPG is currently rated as a buy by UBS, with a price target of $7.60. That’s around 30% upside over the next year, if the broker is right. It thinks it offers a 4.4% grossed-up dividend yield for FY22.

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is another major Australian business. It is a major retailer of electronics and home appliances.

The company’s latest sales update, which was for the first quarter of FY22, showed a year on year decline of sales in each of its divisions. JB Hi-Fi Australia sales were down 7.9%, JB Hi-Fi New Zealand sales were down 6.4% and The Good Guys sales were down 6.1%.

However, JB Hi-Fi noted that there had been COVID restrictions impacting the situation and it was continuing to see heightened customer demand and strong sales growth rates over a two-year period.

Some analysts, such as Credit Suisse, were impressed that the first quarter was so strong from the ASX blue chip share.

JB Hi-Fi is focused on generating sustainable long-term growth. The business believes that it has five unique competitive advantages that can help it grow and continue to achieve attractive margins: scale, a low cost operating model, quality store locations, supplier partnerships and a multichannel capability.

The broker Ord Minnett currently rates JB Hi-Fi as a buy, with a price target of $54. It thinks that the retail sector will benefit from ongoing strong consumer spending due to various COVID impacts.

Ord Minnett puts the JB Hi-Fi share price at 13x FY22’s estimated earnings with a projected grossed-up dividend yield of 7.3%.

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

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

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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 no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom 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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