Every month, analysts at Morgans pick out their best ASX stock ideas.
These are the ASX stocks that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe. Morgans notes that they are supported by a higher-than-average level of confidence.
Among its best ideas for May are the two ASX 200 stocks listed below. Here's what the broker is saying about them:
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Nextdc Ltd (ASX: NXT)
Morgans thinks that this data centre operator could be an ASX 200 stock to buy this month.
The broker is expecting another strong result from the company in FY 2024 and then expects more of the same in the coming years thanks to structural tailwinds. The broker explains:
NXT should deliver another good set of results in FY24 with some upside risk to guidance, in our view. Structural demand for cloud and colocation remains incredibly strong. NXT's new S3 and M3 data centres are now open. Consequently, we expect significant new customer wins over the next six-to-twelve months (including CSP options being exercised). Sales should drive the share price higher. NXT looks comfortably on-track to generate over $300m of EBITDA in the next three to five years.
Morgans has an add rating and a $19.00 price target on the company's shares. Based on the current NextDC share price of $17.09, this implies a potential upside of 11% for investors over the next 12 months.
Woodside Energy Group Ltd (ASX: WDS)
Another ASX 200 stock that Morgans has on its best ideas list is energy giant Woodside.
The broker believes that the market is undervaluing its shares at present and that this has created a buying opportunity for investors. Particularly given its high-quality earnings and healthy balance sheet. It said:
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 a $36.00 price target on the ASX 200 stock. This suggests a potential upside of 29% for investors. A 5.8% dividend yield is also expected.
