Tesco in the Bargain Bucket? ?? Taylor Wimpey still a FTSE 100 darling? ?? ASOS a Bargain or Fashion Disaster? ??
The FTSE 100 gained as much as 54 points, only to lose 94 points as industry and economic reports dropped a mixed bag of data this week ???House prices?continued to slide but came in a tinge better than expected ???? However, any optimism was offset by a poor?RICS reading, with BRC retail sales figures not helping either ??? And although?Q2 GDP?was positive, good news is bad news in the current environment ??
On another note, we’d like to extend a warm welcome to two astute analysts who recently joined our team! ???? ?? First is? James Fox, PhD ?— with a PhD in Development Studies, he specialises in covering a range of industries from pharmaceuticals to oil and energy ?? Next up is? Charlie Carman ?— an ex-Bank of England staff who covers a wide range of industries including mining, financials, fashion, and tobacco ??
?? ICYMI — Everything that happened on Investing Reviews this week:
Tesco?(LON:TSCO) shares have fallen 4% over the past year amid high inflation and economic uncertainty ??? However, Tesco still maintains a strong market share of 27% and its large scale provides a competitive advantage on costs ?? Despite near-term headwinds, Tesco recently reaffirmed guidance for flat operating profit this year ????
Supermarkets have recently come under fire for benefiting from inflation, but Tesco's falling margins and profits show otherwise as it continues to absorb higher costs ?? After all, it makes strategic price matches to compete with discount retailers like Aldi and Lidl which have been gaining market share ?? But there are signs inflation is easing which could benefit Tesco if shoppers return to higher margin products ??
Either way, the defensive nature of the food retailer should encourage earnings growth even in a potential recession ?? Tesco also offers an attractive 4.3% dividend yield. So, despite near-term uncertainty, the long-term outlook is positive for UK's largest retailer ????
???Click here?to read the piece in more detail ??
??? Our Takeaway:?With an adjusted P/E of 11.4 compared to its 5-year average of 18.2, Tesco shares appear undervalued. Hence, we reaffirm our Buy rating with a price target of ￡2.90 ??
The?Taylor Wimpey?(LON:TW) share price has seen wild swings this summer, crashing 22% and then rebounding 19% in one month ?? This volatility comes amid uncertainty in the UK housing market due to rising mortgage rates ?? Taylor Wimpey's latest results beat expectations, but near-term doubts linger ?
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Nonetheless, the Wycombe-based builder upgraded its guidance for UK home completions this year, showing resilience ???? Management expects lower build cost inflation too, which should aid its bottom line ?? But perhaps more importantly, its affluent customer base and selective land purchases should help it weather the storm ??
While the outlook for the housing market remains unclear, Taylor Wimpey appears well-positioned for the long term ??? Its 7.8% dividend yield provides income during volatility as well, which is a plus for those investing for passive income ??
???Click here?to read the piece in more detail ??
??? Our Takeaway:?With shares rallying above our price target after the results, we question whether the recent rebound is justified. Volatility seems likely to continue in the near term for this homebuilder. Therefore, we’ve opted to downgrade the stock to a Hold from Buy ??
ASOS?(LON:ASC) stock has plunged 93% over 5 years, leading to its removal from the FTSE 250 index ???? The online fashion retailer faces intense competition and declining sales ?? However, the company returned to profitability last quarter and is cutting costs to improve its balance sheet ?
There are glimmers of hope for recovery as management reduces unprofitable inventory and refocuses on core branding strengths like Topshop ?? But the company continues to lose customers and revenue across all regions ?? Rivals like Shein and Temu are putting pressure on margins too ??
ASOS aims to chart an independent course, but it must show sales stabilisation and cost discipline in order to fully regain investor confidence ???? The path ahead remains challenging for this fallen fast fashion star ??
???Click here?to read the piece in more detail ??
??? Our Takeaway:?Considerable uncertainty remains, but the battered share price could represent a high-risk, high-reward bet with plenty of upside potential ??
That’s all for this week, folks! Thank you for reading and have a splendid weekend ?? If you enjoyed this newsletter,?do share this newsletter with your colleagues, friends, and family to sign up! ??