This year, Goldman Sachs has added a number of Buy-rated equities to its Conviction List, which it anticipates will outperform, resulting in greater increases for these stocks. S. Rio Tinto Rio Tinto, an Australian miner, was his most recent addition as of March 3. It happens at a time when Goldman Sachs is becoming more upbeat about an anticipated resurgence in China for commodities like iron ore. In the March 3 note, bank analysts stated that they had increased their iron ore pricing projections from $100 per ton to $120 per ton, partly as a result of anticipated growth in Chinese steel shipments. They also noted China’s continuous recent recovery in real estate sales. Typically, real estate sales result in launches, which increase demand for steel, according to the analysts.
Due to Rio Tinto’s “compelling” relative pricing in comparison to its competitors, robust free cash flow, dividend yield, and the bank’s “bullish view” on the prices of iron ore, aluminum, and copper, according to Goldman, the company was added on its list of beliefs. Rio Tinto’s price goal was set at $140, up 10% from Friday’s closing price. This week, Rio Tinto revealed its 2022 financial results, which revealed a 38% decline in full-year profit due to lower iron ore prices brought on by a weakening Chinese economy and rising labor expenses. The situation in China would, however, be better as soon as it reopens as consumption there is beginning to show indications of improvement. Sea Sea, a Southeast Asian IT behemoth, was a recent addition to Goldman’s list of convictions.
Goldman reiterated its buy rating on the company in a Feb. 16 note, saying it believes the stock will deliver above-average profitability this year and demonstrate a return to growth. The company’s online shopping platform, Shopee, and gaming arm Garena are two of its main money-making ventures. Goldman analysts said they see a “visible path to a sustained stock price recovery” as earnings are likely to turn positive along with attractive valuations. In their bull-case scenario, the banks expect the company’s stock price to hit $219 — giving it more than 240% upside potential. “Our bull-bear scenario analysis below suggests an attractive risk-reward outlook, with potential upside of 242% if we assume multiple rallies in valuation, where Sea’s segments are down on improving sentiment/ prospects were traded earlier,” the bank said. Alibaba The above additions to the conviction list come after Goldman added Chinese tech giant Alibaba in January this year.
Alibaba’s prospects have improved in 2023 as China reopens, and the stock is the best way to see a recovery in China’s internet sector, Goldman said. “We continue to see earnings growth and expect more room for performance in China’s internet sector due to China’s faster-than-expected reopening, Q2 macroeconomic recovery and normalization of internet regulations,” the bank said in a Jan. 9 statement. Goldman also raised Alibaba’s target price to $138, giving it potential upside of over 50% from Thursday’s close for its U.S.-listed stock. – CNBC’s Michael Bloom contributed to this report.