Having a few ASX 200 blue chip shares in your portfolio is usually a good idea.
But which ones offer strong potential returns for investors right now?
Two that Goldman Sachs is tipping to rise materially from current levels are listed below. Here's what the broker is saying about them:
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Qantas Airways Limited (ASX: QAN)
The first ASX 200 blue chip share to look at is airline operator Qantas.
Goldman believes that the market is undervaluing the company's shares, especially given how its earnings capacity has increased materially since pre-COVID times. The broker explains:
Notwithstanding a decline in unit revenues (and group capacity still at 95% of pre-COVID) our estimated FY24e EPS sits ~70% above pre-COVID levels. Despite this, QAN's market capitalisation and EV are 17% and 24% lower than pre-COVID levels. We acknowledge broader macro uncertainty at this point in the cycle, but believe the current share price does not reflect the group's improved earnings capacity. […] We believe the stock is not even pricing in a 'generic' recovery, let alone improved earnings capacity.
Goldman has a conviction buy rating and $8.25 price target on its shares. This implies potential upside of 48% for investors.
Xero Limited (ASX: XRO)
Another ASX 200 blue chip share that Goldman Sachs rates as a buy is cloud accounting platform provider Xero.
It likes the company due to its significant growth opportunity in a market estimated to comprise over 100 million small to medium sized businesses globally. The broker also sees now as an attractive entry point for investors. It said:
We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$76bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – we are Buy rated.
Goldman has a buy rating and $141.00 price target on its shares. This suggests potential upside of almost 30% from current levels.
