Why Citi just upgraded this ASX 300 share

Now could be the time to buy this beaten down ASX 300 share.

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The team at Citi has just become positive on an ASX 300 share and see decent upside and a big dividend yield on the cards for investors.

That share is baby products retailer Baby Bunting Group Ltd (ASX: BBN).

What is Citi saying about this ASX 300 share?

According to the note, with its shares down over 50% since this time last year, the broker believes that they are now trading at a level that offers an attractive risk/reward. Citi commented:

We upgrade to Buy as we think the c.9% decline in the share price since the FY23 result (11 August) adequately reflects the uncertainty around the consumer.

The broker also suspects that a better-than-expected trading update could be coming at next month's annual general meeting and drive the ASX 300 share higher. It adds:

We see a better-than-expected AGM trading update (10 October) as a potential catalyst to move the stock higher, noting we anticipate LFL sales to improve from the first 6 weeks (-9% on pcp) as i) comps get easier to cycle, and ii) some retailers which reported later in the reporting season indicated trading had improved in August relative to July (eg Accent, Michael Hill).

Citi also sees the new CEO appointment as a reason to be positive. It adds:

Further, the new CEO will have commenced his role by the AGM (commencing 2 October), and we think a greater focus on supplier partnerships, cost optimisation and store refurbishments may be taken positively, to the extent that it doesn't put too much pressure on the balance sheet. The stock is trading at 14x FY24 PE.

Decent upside and a big dividend yield

Citi has put a buy rating and a $2.20 price target on the company's shares.

Based on the current Baby Bunting share price of $1.93, this implies a potential upside of 14% for investors.

In addition, the broker expects fully franked dividend yields of 5.2% in FY 2024, 7.3% in FY 2025, and then 8.3% in FY 2026.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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