Two popular ASX shares that feature in countless portfolios are data centre operator Nextdc Ltd (ASX: NXT) and buy now pay later (BNPL) provider Zip Co Ltd (ASX: ZIP).
But according to one analyst, only one of these shares is in the buy zone right now.
Let's see what DP Wealth Advisory is saying about these shares, courtesy of The Bull.
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Zip shares
DP Wealth Advisory is feeling bullish about this BNPL provider and appears to believe its shares can keep rising. This is despite Zip shares climbing more than 70% over the past 12 months.
The wealth advisor has named Zip as a buy due largely to its opportunity in the massive United States market. It explains:
Despite the strong share price performance during the past 12 months, there's still much to like about Zip, in particular the significant opportunity in the buy now, pay later (BNPL) space in the US. The BNPL market in the US is quite immature relative to Australia or Europe. With 6 million active clients and 83,000 merchants processing 88 million transactions to the value of about $12 billion, it wasn't surprising the business provided an earnings upgrade in June. ZIP is holding more than $400 million in cash and bad and doubtful debts are low at 1.6 per cent. Investors should expect volatility, so the stock should be considered higher risk.
NextDC shares
Another ASX share that DP Wealth Advisory has given its verdict on is NextDC. But unlike Zip shares, the wealth advisor isn't feeling bullish about this data centre operator and has labelled it as a sell.
It has concerns over the capital intensity of its business model. It explains:
NXT operates a network of data centres. The stock has appealed to some investors on demand for artificial intelligence. However, past capital raisings to fund expansion diluted the stock. The company recently announced it had increased its debt facilities to $5.1 billion, after entering into a binding agreement for a new $2.2 billion debt funding package to accelerate growth. I remain cautious about the company's outlook given the capital hungry nature of its business.
Though, it is worth noting that a large number of brokers rate NextDC shares as a buy.
For example, Morgans has a buy rating and $18.80 price target, UBS has a buy rating and $20.20 price target, Morgan Stanley has an overweight rating and $20.50 price target, and Macquaire has an outperform rating and $22.10 price target. These price targets imply potential upside of 30% to 50%.
