Commonwealth Bank of Australia (ASX: CBA) shares have been a great investment in the last 12 months. But, experts are looking at other ASX stocks as much better opportunities.
According to CommSec, there are 14 analysts who rate the business as a sell. Meanwhile, there are ten analysts who are calling Superloop Ltd (ASX: SLC) shares a buy.
Superloop's share price is currently trading at approximately $3.30, but the broker UBS believes the business could see a rise of around 16% in the next year. Meanwhile, UBS is essentially forecasting that CBA shares could drop close to 32% over the next 12 months.
In other words, Superloop could outperform CBA shares by almost 50% in the next year, if the broker's estimates are correct.
Why do UBS and other analysts like the business, which has already more than doubled in the last 12 months. Let's take a look.
Reasons to be bullish about this $3 ASX stock
UBS said its positive view is underpinned by the belief that cash earnings per share (EPS) could grow at a compound annual growth rate (CAGR) of 30% in the next three years, including capital expenditure.
The broker's base case earnings growth is "wholly underpinned" by Superloop's position as the enabler of Challenger brands growing market share to 35%, compared to the current 20%, representing an A$3 billion revenue opportunity.
UBS also said that the company's Smart Communities also represents a "key area of potential valuation upside." Discussing the potential for this ASX stock to deliver more than $20 million of operating profit (EBITDA) by FY28, the broker said:
Our scenario modelling has A$21mn of EBITDA in FY28. Smart Communities is the ownership of "last-mile" fibre infrastructure for new residential Single dwelling units (SDU) and Multi dwelling units (MDU). Once "active" Superloop charges RSP's who service the end-customer with broadband a monthly "Network fee". This is potentially the highest quality earnings stream within the broader Superloop company. It has the attractive combination of long-term infrastructure like recurring revenue and high c.80% GP margins (vs. Group currently 34%). We estimate a cash payback period of 2.6yrs and ROIC of 38%. On average c.125k new developments are constructed in Australia every year. NBN and Uniti (Opticomm) are the dominant players. Our scenario modelling assumes Superloop gets 10% of the mkt for an incremental 12k lots p.a.
Superloop share price valuation
Broker UBS is forecasting the ASX stock could generate $30 million of net profit after tax (NPAT) in FY25 and that this could rise to $87 million by FY29.
At the current Superloop share price it's valued at 55x FY25's forecast earnings. This valuation may be justified if the company's net profit can soar as expected. It could certainly be one to watch, according to experts.
