Why this ASX 200 stock could generate a 40% 12-month return

Goldman Sachs is predicting huge returns from this stock.

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If you are on the lookout for big returns to supercharge your investment portfolio, then read on.

That's because analysts at Goldman Sachs have just tipped an ASX 200 stock to generate a 12-month total return of over 40%.

To put that into context, a $10,000 investment in this company's shares would turn into approximately $14,000 in a year if the broker is on the money with its recommendation.

Which ASX 200 stock could deliver big returns?

The ASX 200 stock in question is media and entertainment company Nine Entertainment Co Holdings Ltd (ASX: NEC)

According to a note that was released this morning, the broker has responded to the company's strategy day presentation by retaining its buy rating and $2.10 price target.

Based on the Nine Entertainment share price of $1.53, this implies potential upside of 37% for investors over the next 12 months.

In addition, Goldman Sachs is forecasting fully franked dividend yields of 5.2% in FY 2024 and then 5.9% in FY 2025. This boosts the total annual potential return to over 42%.

What did the broker say?

Goldman was cautiously optimistic about the strategy day update, noting that it demonstrated how the company stands to benefit from its technology, data and artificial intelligence (AI) offerings. The broker said:

Broadly we were encouraged by the detailed update and remain positive on Nine's strategy. However although currently being masked by challenging ad markets, we would want to see the c.$100mn p.a. investment being made in product/tech translate into both above market growth (from higher yields), alongside improving efficiency across the business as ad markets ultimately recover. Nine was upbeat on this, reiterating its view that it can grow its Total TV Audience, grow average CPMs given 9Now adoption, and improve efficiency through AI.

It then adds:

Supporting this view, a range of examples was provided, including: (1) 9 Ad Manager driving 2X CPMs, with 12% of users currently adopting the Gen AI tool; (2) Nine's Second Gen data across its 22mn signed in users and 68 Tribes provides powerful targeting in a cookie-less world; (3) Automated captions to save and estimate $3-5mn in cost p.a.; (4) 9 ExPress, which converts scripted TV news content into news articles is improving output c.100%; (5) Gen AI improving journalist productivity 4X at Domain (potential revenue/opex benefits).

Overall, the broker continues to believe this ASX 200 stock is well positioned to deliver consistent earnings and dividend growth over the coming years. As a result, it thinks it would be a good option for investors at current levels.

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 positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Nine Entertainment. 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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