2 undervalued ASX shares ready to explode higher

Analysts say these shares are primed for growth.

| More on:

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

Key points
  • Woodside and AGL are highlighted as undervalued ASX stocks with significant upside potential due to expected demand growth and attractive entry prices.
  • Analysts forecast Woodside could see an upside of up to 45% with strong buy ratings from several analysts, despite recent share price volatility.
  • AGL is recovering from a significant decline, with analysts projecting a potential increase of up to 31.45%, driven by factors such as rising power prices.

There are several quality ASX shares currently labelled as undervalued, and some of them could provide investors with a significant upside over the next 12 months.

Here are two of my favourite undervalued stocks, which I believe are poised to surge.

A young woman raises her arm in celebration against a backdrop of brightly coloured fireworks in the sky.

Image source: Getty Images

Woodside Energy Group Ltd (ASX: WDS)

It's been a rollercoaster ride for Woodside Energy shares over the past 12 months. The share price crashed to a four-year low of $19.15 per share in April. This followed the company's announcement that it had a binding agreement to sell its 40% interest in a Louisiana gas plant for US$5.7 billion.

The oil and gas giant was also subject to an oil price plunge around the same time. This further dragged down its share price.

After bottoming out in April, Woodside Energy's share price slowly recovered to an annual high in August, before taking a steep nosedive once again. 

Between 26 August and the close of the ASX on Wednesday, the share price has dropped 15.61% to $22.18 per share. Over the year, the shares are 13.4% lower.

But it's not all bad news.

Woodside Energy shares are repeatedly flagged as undervalued by analysts who expect a spike in global energy demand to push energy share prices higher.

According to TradingView data, 7 out of 16 analysts have a buy or strong buy rating on the shares. The remainder have a hold rating.

The data shows analyst estimates for an average 12-month target price of $26.38 and a maximum of $33.08. That represents a potential 15.7% to a whopping potential 45% upside for investors at the time of writing.

Baker Young said the ASX share is undervalued at current levels, is trading at a significant discount to its valuation, and has a generous forecast dividend yield. The broker said it thinks this could be an attractive entry point for investors.

Meanwhile, Morgans has an accumulate rating and $29.60 price target on the shares. This represents a potential 33.5% upside for investors.

Sentiment is certainly divided, though. Macquarie Group isn't as optimistic and recently confirmed its neutral rating and $24 price target on Woodside Energy shares. That still represents a potential 8.2% upside over the next 12 months.

AGL Energy Ltd (ASX: AGL)

AGL shares have declined in value steadily over the past year, before experiencing a sharp 21.43% plunge in August to a 2.5-year low of $8.03 per share. 

The share price has since started recovering and is 12.33% higher at $9.02 apiece, at the time of writing. For the year, AGL's shares are 24.46% lower.

The heavy sell-off followed the release of the company's FY25 results in mid-August. Investors were spooked by the company's 9% drop in EBITDA, 21% decline in net profit, and $98 million loss after tax.

Like Woodside Energy shares, AGL shares are now attractively priced, and there are signs of green shoots of price recovery.

According to TradingView data, 8 out of 11 analysts have a buy or strong buy rating on AGL shares. The average target price is $11.10, and the maximum is $12.10. These target prices represent a potential 23.01% to 34.15% upside for investors at the time of writing.

Macquarie analysts recently confirmed their outperform rating on AGL shares and $11 target price. This represents a potential 22% upside for investors over the next 12 months, from the current trading price. The broker cited tailwinds from rising power prices.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

an oil worker holds his hands in the air in celebration in silhouette against a seitting sun with oil drilling equipment in the background.
ETFs

Up 30% in a month: Is it too late to buy the BetaShares Crude Oil ETF (OOO)?

These oil-based ETFs might be looking tempting...

Read more »

Rising ASX uranium share price icon on a stock index board.
Energy Shares

Why experts just rated this ASX uranium share as a buy

Experts are bullish about the prospects of this energy business.

Read more »

an oil refinery worker checks her laptop computer in front of a backdrop of oil refinery infrastructure. The woman has a serious look on her face.
Energy Shares

Are these ASX energy shares still a buy after jumping 20% (or more)?

The direction of oil prices may be the key variable to watch in the months ahead.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

What's next for the Woodside share price?

Shares across the oil and gas sector are tumbling today.

Read more »

A close up of a man with wide open eyes and wide open mouth holding his head and reacting in shock and surprise to some share market news.
Energy Shares

Why are ASX 200 energy shares getting smashed on Tuesday?

After surging yesterday, ASX 200 energy shares are tumbling on Tuesday.

Read more »

an oil refinery worker checks her laptop computer in front of a backdrop of oil refinery infrastructure. The woman has a serious look on her face.
Energy Shares

Santos share price is tumbling from an 18-month high: Buy, hold or sell?

The oil and gas producer's shares have come off the boil today.

Read more »

An image showing a red graph with a white arrow pointing downwards above three black barrels of oil.
Energy Shares

Oil tumbles after nearing US$120. Here's why prices are pulling back

Oil retreats toward US$90 after nearing US$120 on Monday.

Read more »

View of a business man's hand passing a $100 note to another with a bank in the background.
Energy Shares

Woodside shares edge higher as Meg O'Neill prepares to take the top job at BP

Former Woodside CEO Meg O’Neill could receive a $22 million pay package at BP.

Read more »