Every month, the team at Morgans picks out its best ASX share ideas.
These are the ASX shares that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe. The broker also notes that they are supported by a higher-than-average level of confidence.
Among its best ideas for February are the two ASX 200 stocks listed below. Here's what the broker is saying about them:
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Qantas Airways Limited (ASX: QAN)
Morgans continues to believe that this ASX 200 airline stock is severely undervalued by the market.
Its analysts highlight that its shares still trade at a discount to pre-COVID times despite having a significantly stronger business now. The broker said:
QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings). The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further earnings growth over FY24/25. QAN's balance sheet strength positions it extremely well for its upcoming EBIT-accretive fleet reinvestment and further capital management initiatives (recently announced another A$500m on-market share buyback at its FY23 result).
Morgans has an add rating and $7.30 price target on Qantas' shares.
Woodside Energy Group Ltd (ASX: WDS)
A new addition on Morgans' best ideas list is Woodside Energy. Its analysts believe that now could be an opportune time to snap up the energy giant's shares. Particularly given that it feels the company is well-placed to generate high quality earnings for the foreseeable future. It explains:
A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS's share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project.
With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions. Increasing our conviction in our call is the progress WDS is making through the current capex phase, while maintaining a healthy balance sheet and healthy dividend profile. WDS still has to address long-term issues in its fundamentals (such as declining production from key projects NWS/Pluto), but will still generate substantial high-quality earnings for years to come.
Morgans has an add rating and $34.30 price target on the ASX 200 energy stock.
