Morgans has named a number of ASX shares as buys, and three very different opportunities stand out to me.
One is a wine company trying to rebuild returns. One is a wagering and gaming business dealing with a regulatory cloud. The other is a furniture retailer with a long history of disciplined expansion.
That mix makes this interesting. These are not lookalike recommendations, with each buy call being driven by a different investment case.
Image source: Getty Images
Treasury Wine Estates Ltd (ASX: TWE)
Treasury Wine Estates is one ASX share Morgans thinks investors should be buying.
The broker has a buy rating and a $5.95 price target on the wine giant. Based on the current share price of around $4.79, that suggests potential upside of around 24%.
Morgans believes Treasury Wine's recent Investor Day was the positive share price catalyst it had been expecting. The broker pointed to ongoing depletions growth and noted that the mid-point of FY26 EBITS guidance was slightly ahead of consensus estimates.
But the bigger part of the investment case appears to be what comes next.
Treasury Wine has been working through a transformation program called Ascent. Morgans believes this program can support sustainable, high-quality earnings growth and help deleverage the balance sheet over the medium to long term.
That is important because Treasury Wine has not always delivered the returns investors hoped for. The company owns premium brands, including Penfolds, but the share market has wanted clearer evidence that the business can convert those brands into more attractive financial outcomes.
Morgans has upgraded its FY27 and FY28 forecasts and says the stock is trading on low multiples. It also believes new management can deliver more acceptable returns over time.
I think that makes Treasury Wine an interesting recovery-style buy, provided investors are comfortable with the execution risk.
Tabcorp Holdings Ltd (ASX: TAH)
Tabcorp is another ASX share Morgans recommends as a buy.
The broker recently upgraded the wagering company from accumulate to buy and placed a $1.07 price target on the stock. With Tabcorp shares trading around 87 cents, that implies potential upside of roughly 23%.
The backdrop is unusual. Morgans notes that Tabcorp's share price has fallen approximately 37% since AUSTRAC's investigation was announced earlier this month.
Regulatory investigations can hang over a stock for some time, and Morgans expects this one to remain an overhang for the foreseeable future. But at current levels, the broker believes Tabcorp looks materially undervalued.
Morgans argues that the roughly $960 million fall in market value is overly pessimistic and appears to reflect a very bearish scenario. The broker has taken a cautious approach by adding incremental operating costs linked to remediation in its base case, while noting that every 1% increase in compliance costs would reduce EBITDA by 1.6%.
The investment case here rests on valuation, current trading conditions, and the possibility that the market has reacted too harshly.
Nick Scali Ltd (ASX: NCK)
Nick Scali is the third ASX share on Morgans' buy list.
The broker recently initiated coverage with a buy rating and a $17.84 price target. Based on the current share price of around $16.39, that suggests upside of around 9%.
Morgans describes Nick Scali as a high-quality retailer with a long track record. The broker highlights its history of long-term earnings per share growth through disciplined store rollout, like-for-like growth, strong margins, and operating leverage.
I think the business model is the appealing part here. Nick Scali has shown that furniture retailing can be highly profitable when the store network, product range, pricing, and cost base are managed well.
Morgans also points to strong cash generation and the company's balance sheet. It notes that the business benefits from structural negative working capital, high cash conversion, and relatively low capital intensity when opening new stores.
That leaves room for dividends, property purchases, and growth.
The broker also sees more store rollout optionality, including Plush and Nick Scali growth in Australia and New Zealand, as well as a UK opportunity.
Foolish takeaway
These three Morgans buy calls are interesting because they are not built around the same theme.
Treasury Wine is a recovery story, Tabcorp is a valuation call under a regulatory cloud, and Nick Scali is a quality retailer with rollout potential.
Each carries risk, and none should be treated as a simple bargain just because a broker is positive. But for investors looking across different parts of the ASX, I think these three shares are worth a closer look.
