2 strong blue chip ASX shares rated as buys

Telstra is one of the ASX blue chips that are buy-rated right now.

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Key points

  • Some of the leading ASX blue chip shares are rated as buys and could be opportunities
  • Telstra has revealed its T25 strategy that involves lower costs, more profit, extended 5G coverage and the intention for higher dividends
  • Aristocrat Leisure is a pokies machine and mobile game provider. It’s recovering from COVID impacts and also making an acquisition play for UK company Playtech

Analysts are always on the lookout for opportunities. Some of the leading blue chip ASX shares are currently rated as a buy by brokers.

What is a blue chip? It’s usually a business that is described as a leader in its industry, or it’s dependable during most phases of an economic cycle.

Blue chips may be able to provide reliable dividends and/or fairly consistent growth over the long-term.

With that in mind, these two ASX blue chips could be options:

Telstra Corporation Ltd (ASX: TLS)

Telstra is Australia’s leading telecommunications business. It’s rated as a buy by several brokers including Ord Minnett.

There are several things that the broker likes about Telstra. The company recently released its T25 strategy.

The telco is expecting higher profits in the years to FY25. Growing profit could be one of the main factors that drive the Telstra share price higher. It’s aiming for compound annual growth of mid-single digits for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and high-teens growth for underlying earnings per share (EPS).

Part of that rising profit will come from a reduction of net fixed costs by another $500 million.

The broker also thinks there is further potential for the blue chip ASX share to turn some of its assets into money for shareholders.  

When it comes to the dividend, Telstra said it’s looking to keep paying an annual dividend of $0.16 per share, whilst also seeking to grow the dividend over time as earnings rise and the company franking account balance increases.

On Ord Minnett’s FY23 estimates, the Telstra share price is valued at 21x FY23’s estimated earnings with a grossed-up dividend yield of 5.8%.

Aristocrat Leisure Limited (ASX: ALL)

Aristocrat Leisure describes itself as a leading global gaming content and technology company. It offers several products and services including electronic gaming machines (that you’d find in a casino), casino management systems and free-to-play mobile games.

It’s currently rated as a buy by several brokers including UBS. This broker has a price target on the business of $53.60. That suggests a potential upside of more than 30% at the current level. One of the things noted is that Aristocrat Leisure is gaining market share.

FY21 saw a substantial increase in profitability for the business. Whilst revenue rose 14.4% to $4.74 billion, the EBITDA jumped 43% to $1.54 billion and net profit after tax (NPAT) increased 114.4% to $765.6 million.

It’s also looking to buy the UK business Playtech, which is a leading global online gambling software and content supplier for an enterprise value of A$5 billion. It’s expected to add to profit in the first year of ownership and will accelerate the blue chip ASX share’s growth strategy over the medium-term and deliver “sustainable shareholder value”.

Using UBS estimates for FY23, the Aristocrat Leisure share price is valued at 21x estimated earnings.

Should you invest $1,000 in Aristocrat Leisure right now?

Before you consider Aristocrat Leisure, 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 Aristocrat Leisure 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 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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