If you are looking for some market-beating returns for your portfolio, then Bell Potter has you covered.
It has just named two ASX 200 stocks as buys with the potential to rise strongly from current levels. Here's what it is recommending:
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CAR Group Limited (ASX: CAR)
Bell Potter remains positive on this auto listings company following its half-year results release.
In response, the broker has retained its buy rating on the ASX 200 stock with a trimmed price target of $39.80 (from $42.20). Based on its current share price of $27.19, this implies potential upside of 46% for investors over the next 12 months.
Commenting on its results, the broker said:
CAR's interim result was in-line with expectations with adj. EPS growing 11% YoY to 52cps (BPe: 51.9cps) and was broad-based across the Group. All regions ex. Aus grew revenue double digits (Group: +8% to $626m; BPe: $621m) and margins were broadly in-line with expectations (Group adj. EBITDA +12% to $339m; BPe: $339m). CAR finished the half with cash at bank of $232m (net debt: $1.1b) and announced a 40% franked 42.5cps dividend.
And while the broker has trimmed its valuation, it remains very positive on the investment opportunity here. It adds:
We have reduced our Target Multiples in PER (36x to 30x) and SOTP, in part reflecting a higher risk-free rate and potential for AI-based competition in the current environment. CAR's global network of auto and non-auto classifieds platforms has scaled the ability to generate cash flows supporting growth investment and shareholder returns simultaneously. CAR is proactively implementing AI solutions across its platforms and geographies on top of a technical eco-system integrated into Dealer management workflows, network effect and unique data sets. Retain Buy.
REA Group Ltd (ASX: REA)
Another ASX 200 stock that gets a thumbs up from Bell Potter is property listings company REA Group.
In response to its half-year results, the broker has retained its buy rating with a reduced price target of $211.00 (from $244.00). Based on its current share price of $174.87, this suggests that upside of 21% is possible between now and this time next year.
Commenting on its recommendation, Bell Potter said:
Our Target Price decreases via lift in risk free rate 4.5% (prev. 4.0%) in our WACC and reduction of target multiples in our PER (40x prev. 45x) and SOTP. While we recognise the potential for disruption in a rapidly evolving environment, we currently see the pullback in valuation overdone considering that REA's moat lies in decades of property, customer and buyer intent data and inherent network effect via established and highly engaged audience. Therefore, REA's shareholder value sits below the user interface level which is difficult to replicate. Retain Buy.
