The team at Goldman Sachs has been looking over the federal budget and has given its verdict on how it expects consumer spending to be impacted.
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What did the broker say?
Goldman expects the budget to be supportive of consumer spending in the coming years. Though, it suspects that the spending may not be equal across the economy.
It commented:
"Within the robust consumption spend (~6.7% FY22-24e), we believe that a larger portion will return to services spending, with a catch up on lifestyle services (travel, entertainment etc, ~10.8% FY22-24e) post COVID, while Essential Services (~7.3% FY22-24e) and Staples Retail Goods (~4.4% FY22-24e) will remain a relatively stable share of spend. We expect Discretionary Retail Goods (Household equipment, clothing), which benefited most during COVID lock-downs, will see challenged growth (~-2.4% FY22-24e)."
With this in mind, the broker has named four ASX shares to buy:
Endeavour Group Ltd (ASX: EDV)
Goldman Sachs is positive on this drinks company and has a conviction buy rating and $8.00 price target on its shares.
It explained why it is positive, saying: "For the breadth of its consumer assets and depth of loyalty as well as more advanced digital transformation driving market share gain and faster sales growth and margin expansion. F&B retailers are also more defensive vs cost inflation and China supply chain disruptions given better bargaining power and more localized supply chain."
Harvey Norman Holdings Limited (ASX: HVN)
The broker prefers Harvey Norman over rival JB Hi-Fi Limited (ASX: JBH). It has a buy rating and $5.80 price target on the former's shares, whereas it has a sell rating and $39.00 price target on the latter.
Goldman explained: "We are cautious on home retailers due to exposure to China supply chain disruption and cost inflation risks, while competition from online pureplays such as Amazon are picking up speed. Between JBH and HVN, we prefer HVN due to more protection from online competition given higher regional and boomer exposure as well as lower valuation."
Webjet Limited (ASX: WEB)
Goldman believes this online travel agent could be well-positioned for growth post-COVID. So much so, it has a buy rating and $6.90 price target on its shares.
The broker commented: "We expect WEB to benefit from the tailwind of travel recovery, offering structurally improved profitability and a strong outlook on the Bedbanks business, which we expect to resume the strong growth journey that it embarked on prior to COVID."
Woolworths Group Ltd (ASX: WOW)
Its analysts are also bullish on retail giant Woolworths for the same reason as Endeavour. The broker likes the company due to the breadth of its consumer assets and wide-reaching loyalty program.
Goldman has a buy rating and $40.50 price target on the company's shares.
