Goldman Sachs has been busy running the rule over the small to mid-sized companies that it has under coverage ahead of earnings season.
Two buy-rated ASX shares that it believes will outperform expectations this month are listed below. Here's what it is predicting:
Life360 Inc (ASX: 360)
According to the note, Goldman Sachs is expecting this location technology company to outperform expectations later this week when it releases its second quarter update.
The broker is forecasting revenue of US$88.9 million and adjusted EBITDA of US$6.5 million for the three months. This is comfortably ahead of the consensus estimates of US$85.4 million and US$2 million, respectively.
Also expected to come in ahead of expectations are monthly active users at 69.6 million (cons. 67.4 million) and paying circles at 2.01 million (cons. 1.94 million).
Commenting on what else to look out for, Goldman said:
360 reports its 2Q result on Friday 9th August 2024. We will be focused on: (1) Subscription growth outlook through the back half of CY24 following strong subs momentum in 2Q24 (2mn paying subs announced in Jun-24), and the composition of subscription growth across the US and international; (2) Advertising outlook/guidance, including top line and margin expectations, and details on user base monetisation; and (3) Longer term margin framework, such as commentary regarding statutory EBITDA +ve in FY25E while reinvesting into longer-term growth initiatives.
The broker has a buy rating and $16.05 price target on its shares.
IDP Education Ltd (ASX: IEL)
Another ASX share that has been tipped to outperform is language testing and student placement company IDP Education.
Goldman expects the company to report revenue of $1,030.7 million (cons. $1,028.8 million) and net profit after tax of $153.1 million (cons. $149.6 million) for FY 2024.
This is expected to underpin a larger than expected dividend of 39.7 cents per share (cons. 38.2 cents).
The broker will also be looking out for the following:
IEL will report its FY24 result on Thursday 29 August 2024. At the result we will be looking for: (1) Lead indicators for the SP business into FY25 following regulatory change across AU/CA/UK to manage migration, particularly on the magnitude of potential market share gains which may offset SP market softness; (2) IELTS trough volume expectations and recovery outlook given regulatory uncertainty has driven weaker sentiment from India / South Asia students; and (3) Cost outlook and the implementation of the cost reduction program for FY25, noting IEL do not expect the cost out initiatives to impact its operational footprint.
Goldman has a buy rating and $21.75 price target on its shares.
