It is never a bad idea to buy high-quality companies, especially when they are good value.
Well, the good news is that three ASX 200 stocks that tick both these boxes are listed below.
Let's see why analysts are bullish on these names:
Light & Wonder Inc. (ASX: LNW)
The team at Morgans is feeling very bullish about this gaming technology company and feels that recent share price weakness has created a buying opportunity for investors.
Morgans currently has an add rating and $180.00 price target on its shares. This implies potential upside of almost 30% for investors over the next 12 months.
Although the broker acknowledges that litigation relating to its Dragon Train game remains an overhang, it feels that investors should look beyond this. Especially as the game only contributes 5% of earnings. It said:
While litigation remains an overhang, we think the share price decline is overdone. Negative sentiment around the injunction and upcoming legal catalysts will linger, but it shouldn't detract from the company's strong fundamentals. Light & Wonder has a solid track record of delivering and in our opinion has the potential to be a multi-year compounder.
It boasts top-tier game developers, including much of the team behind Aristocrat's standout growth in the 2010s. Light & Wonder is busy buying back stock as it believes the share price undervalues the business. We agree and regard the discount to Aristocrat on which Light & Wonder trades as unwarranted.
Woolworths Group Ltd (ASX: WOW)
Analysts at Goldman Sachs see Woolworths as a top ASX 200 stock to buy in January. They have a buy rating and $36.20 price target on its shares, which suggests that upside of 19% is possible.
The broker likes Woolworths due to its leadership position in a defensive market and the prospect of it dominating the online food market in Australia.
So, with its shares down 19% year to date, it feels that now could be the time to invest. It said:
Our Buy thesis is based on 1) robust supermarkets growth of ~4% in FY23-26E driven by strong population growth and a rational, oligopoly environment; 2) omni-channel leader further extending share gains due to its early mover advantage in digitalization and omni-channel execution.
By 2030E, we expect WOW to be the dominant leader in online with ~50% share in a space that is expected to go from 5% to 10% of the total grocery market; 3) loyalty/retail media further margin opportunities: Woolworth's strong digital and omni-channel advantage is further reinforced through a virtuous cycle of loyalty and retail media (Cartology). WOW is also trading below fair value.
Xero Ltd (ASX: XRO)
Finally, Goldman Sachs also thinks that Xero could be an ASX 200 stock to buy in January. It has a buy rating and $201.00 price target on the cloud accounting platform provider's shares. This implies potential upside of 20% for investors.
The broker likes the company due to its huge total addressable market (TAM). It notes that this is over 100 million small to medium sized businesses (SMBs), which compares to its current subscriber base of 4.2 million. Goldman said:
Xero is a Global Cloud Accounting SaaS player, with existing focuses in ANZ, UK, North American and SE Asian markets. We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM.
Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.
