Here are 2 cheap Australian shares for the Christmas list

Looking for value investment opportunities? Here's the expert take on two options.

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Whether it's socks or stocks, I like buying good-quality products when they're on sale (think cheap Australian shares!).

Prudent brokers and investors are always on the hunt for undervalued investment opportunities, and there's never been a better time for those seeking to 'buy a dollar coin for 50 cents'. This crowd of value investors is a contrarian bunch who aren't afraid to seek out and buy assets at cheap prices.

Two ASX shares, Medibank Private Ltd (ASX: MPL) and Treasury Wine Estates Ltd (ASX: TWE), have caught the attention of brokers for their cheap valuations and upside potential. Here's a look.

Cheap Australian shares for the Christmas list

If Santa Claus really is coming to town, then it's cheap Australian shares on the list for me. And by cheap, I'm talking about shares with plenty of upside potential.

First up is Medibank Private, the health insurer.

Medibank shares have been under pressure in recent months, sliding from highs of $3.99 in September.

Zooming out, the stock has been volatile ever since last year's widely publicised data breach. This was compounded by its softer-than-expected FY24 results.

In FY24, Medibank reported a nearly 5% increase in revenues to just over $8 billion, driven by a 4% rise in premium income from its core Health Insurance business.

However, resident policyholder growth of 70 basis points fell well short of management's 1.5%–2% target.

Despite this, some analysts see upside potential.

Consensus estimates peg the private health insurer's FY25 earnings at 23 cents per share, an 18% improvement year on year. The median estimate rates Medibank a buy, according to CommSec.

Ord Minnett is one of the bullish crowd and rates Medibank shares as a buy, with a price target of $4.25.

It also forecasts dividends of 17.5 cents per share in FY25 and 17.8 cents in FY26.

If Ord Minnett is correct, the total return for the coming 12 months, dividends included, could be more than 18.5%.

Treasury Wine Estate: Undervalued or not?

Treasury Wine Estates is the steam engine behind brands like Penfolds, Wolf Blass, and 19 Crimes. Wine lovers will raise an eyebrow at the sight of those names, popular or not.

According to CommSec, the cheap Australian share is rated a strong buy from consensus estimates. Of the 17 analysts covering it, only three suggest holding. There are no sell ratings.

Morgans sees the recent acquisition of DAOU Vineyards as a pivotal move in the company's 'premiumisation' strategy. The $1.4 billion deal is set to expand the company's portfolio in the Americas.

The broker said DAOU Vineyards was known as a high-margin, luxury wine offering. This differs from many wines that are considered a commodity, only differentiated by taste.

Morgans rates also Treasury Wine Estates a buy with a price target of $15.03. At the current share price of $11.14, this implies a potential upside of almost 35%.

Foolish takeaway

Both Medibank and Treasury Wine Estates present as interesting opportunities for investors seeking cheap Australian shares. If targets are met, today's values appear adequately priced, according to some experts.

The potential upside implied by broker estimates also delivers a wide margin of safety. This is a critical concept of value investing.

Medibank stock is up 8% in the past year and Treasury Wine shares are up nearly 6%.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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