Goldman Sachs names 2 ASX 200 shares to buy now

These stocks released very different updates this week but share one thing in common – the brokers thinks they are buys.

| More on:
a man looks down at his phone with a look of happy surprise on his face as though he is thrilled with good news.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A couple of ASX 200 shares have released updates this week to very different receptions.

One impressed the market and saw its shares launch higher, the other disappointed investors and led to its shares sinking deep into the red.

Goldman Sachs has been running the rule over the updates and while not overly impressed with one of them, still believes both ASX 200 shares are in the buy zone right now.

Let's take a look at what the broker is saying about them:

IDP Education Ltd (ASX: IEL)

This language testing and student placement company is the one that disappointed the market. The ASX 200 share sank 7.5% after warning about recent changes to regulatory settings.

It advised that a more restrictive policy environment in its key destination countries is reducing the size of the international student market. This has negatively impacted testing and student placement volumes during the second half. As a result, IDP Education is guiding to flat earnings in FY 2024.

Commenting on the update, Goldman said:

IEL's trading update was soft, but should help investors better frame the earnings base for FY25 as the impacts of regulatory tightening measures become clearer.

The broker has now reduced its earnings forecasts for the coming years and expects its earnings to bottom in FY 2025. After which, Goldman believes its growth will resume.

Despite this weak near term outlook, the broker feels that its shares are undervalued. It said:

Overall we now expect FY25 EBIT of A$222mn, -4% vs FY24E, and cut FY24/25/26E EBIT -9%/-17%/-17% with IEL trading on 23x FY26E P/E, even assuming a modest FY26E recovery, though we acknowledge uncertainty remains on the CY25 CA cap and AU university placement caps.

Goldman now has a buy rating and $21.75 price target on its shares. This implies potential upside of approximately 50% for investors.

Treasury Wine Estates Ltd (ASX: TWE)

This wine giant's shares charged higher this week after it reaffirmed its guidance for FY 2024 and spoke positively about its opportunity in North America.

In respect to the former, management continues to expect mid-high single digit EBITS growth for the year. It also advised that work to assess the future operating model for the company's global portfolio of Premium brands is continuing with an update expected in August.

Goldman was impressed with this update and believes its growth is about to accelerate. It said:

In FY22-24e, we expect the company to deliver sales/EBITS/EPS CAGR of 4.0%/12.0%/8.7%, while from FY24-26e, we expect this to accelerate to ~7%/13%/12% respectively. All of this is against a moderately declining growth environment in US/China wine.

In light of the above, the broker has reiterated its buy rating on the ASX 200 share with an improved price target of $13.40. This suggests a potential return of 11% before dividends and almost 15% including them. Goldman concludes:

Our valuation multiple and methodology are unchanged. Our 12m TP of A$13.40/sh (from A$13.00/sh) implies 15% TSR and we reiterate Buy given positive delivery of the strategy reset as well as attractive double-digit EPS growth at an attractive valuation. The stock is trading at 1yr fwd P/E of 20x. The key catalyst for the stock will now be its June 20 Business Update focused on China.

Motley Fool contributor James Mickleboro has positions in Treasury Wine Estates. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Idp Education. The Motley Fool Australia has recommended Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

a woman holds a facebook like thumbs up sign high above her head. She has a very happy smile on her face.
Broker Notes

Bell Potter says these ASX shares are strong buys

Big returns are expected from these shares over the next 12 months.

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Broker Notes

Guess which ASX 300 share could rise over 50%

Bell Potter sees huge upside for this buy-rated stock. Let's see why it is bullish.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Broker Notes

This speculative ASX stock could almost double in value

Bell Potter thinks investors could almost double their money with this high risk option.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

This ASX 200 stock's 'compelling valuation' makes it a strong buy

Goldman Sachs thinks a 50% return could be on the cards for investors.

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX shares could rise 25% to ~50%

Big returns could await buyers of these shares according to analysts.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »