Biggest ASX losers in May could be winners in June

This month has been a particularly volatile period for ASX shares but some of the worst performers could see a …

| More on:
ASX shares buy Street signs stating 'Winners' and 'Losers' in front of urban backdrop

Image source: Getty Images

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

This month has been a particularly volatile period for ASX shares but some of the worst performers could see a rebound in June.

For one, risk appetite appears to be improving again in the last week or so. This means investors could be in a more forgiving mood as they hunt for bargains.

And what better place to look for value stocks than among ASX shares that have been punished for issuing bad news in May?

Returning to growth

Mind you, not all of May's ASX sinners are worth a second glance. However, Goldman Sachs reckons the Costa Group Holdings Ltd (ASX: CGC) share price could be one to back.

The fruit and veggies grower is one of the worst performers on the S&P/ASX 200 Index (Index:^AXJO) for the month. Just about all of its losses came in the last two trading days when it warned that labour shortages and weak prices for some of its produce will weigh on its bottom line.

The update triggered a more than 20% crash in the Costa Group share price. But Goldman is urging investors to buy the stock now as it believes the sell-off is an overreaction.

Buy the dip

"The business is well positioned over the medium term. Expansion of international operations is the key growth driver in the business," said the broker.

"We forecast China/Morocco to contribute 36% to Group EBITDA by FY23 (vs. 17% in CY19)."

Goldman reiterated its "buy" recommendation on the Costa Group share price with a 12-month price target of $4.85 a share.

Catching a breath

Another laggard with a bright medium-term outlook is the Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price. The medical device maker shed more than 13% in the past week and is down 18.4% in the month.

Earnings disappointment was the trigger for the sell-off but Goldman believes the mid to longer-term prospects remains positive.

Stronger earnings ahead

"Whilst we had factored a sequential slowdown to reflect the decline in hospitalisations, we had under-estimated the extent," said Goldman.

"We re-base our consumables forecasts to reflect this lower exit-rate, driving -8-10% revisions to our FY22-25E sales forecasts. The other negative surprise to us today was that air freight costs appear set to remain elevated for some time (currently running at 2x 'pre-pandemic' levels)."

But the broker's earnings before interest, tax, depreciation and amortisation (EBITDA) forecast for FY22 through FY25 are still 4% to 12% above COVID-19 levels.

Goldman is recommending the Fisher & Paykel share price as a "buy" with a price target of $33 a share.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Broker Notes

Analysts say these ASX shares are top buys in June

Brokers are urging investors to buy these shares. Let's find out why.

Read more »

A man in trendy clothing sits on a bench in a shopping mall looking at his phone with interest and a surprised look on his face.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman and man calculating a dividend yield.
REITs

What price target does Macquarie have on Goodman Group shares?

Goodman Group posted an interesting set of numbers in Q3. Here's Macquarie's take.

Read more »

Miner looking at a tablet.
Broker Notes

Why Macquarie expects this ASX 200 copper stock to surge 36% in a year

Macquarie forecasts some hefty gains ahead for the ASX 200 copper miner. But why?

Read more »

two women celebrating good news on phone
Broker Notes

Top broker names 3 ASX All Ords stocks with between 30% and 77% upside

These 3 stocks offer compelling potential upside.

Read more »

Woman on her phone with diagrams of tech sector related elements linking with each other.
Broker Notes

A leading fund manager is buying these ASX 200 tech shares

Let's see why the fund manager has these shares in its focus portfolio.

Read more »

A young man wearing a black and white striped t-shirt looks surprised.
Broker Notes

Broker says these ASX 200 shares can rise 40% to 80%

Bell Potter sees scope for these shares to rocket from current levels.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Broker Notes

How this undervalued ASX All Ords share could rocket 80% in a year

A leading fund manager expects a big turnaround for this beaten-down ASX All Ords stock.

Read more »