Best 3 ASX 200 stocks to watch in May

The ASX 200: a story of risk

As investors looked to de-risk at any cost, Australian equity markets were battered in March, dropping to an intraday low of 4,402 points on 23 March.

Since then however, markets have rallied strongly, even as economic data – particularly as it relates to the global GDP outlook and unemployment statistics – remains weak.

Economic data aside, at the time of writing, the ASX 200 benchmark traded at the 5,364.20 point level, well above its mid-March lows. Moreover, even with these elevated levels of volatility, there remains pockets of opportunity across equity markets according to some brokers.

With that in mind, below we examine three intriguing ASX 200 stocks that UBS analysts currently see upside potential from.

Domain share price: potential benefits remain in wait

In April Australian property listings collapsed 35% (YoY), as government mandated lockdown rules took its toll on Australia’s real estate market, according to CoreLogic.

Mind you, while listings fell precipitously, dwelling values across the country actually rose, rising 0.3% in April, to a median value of $557,739.

Amidst this volatility, UBS has remained bullish on Domain Holdings (DHG), arguing that the property advertising company is well positioned to benefit from the eventual recovery in Australian property listings activity.

Reflecting on a recent sell-side briefing with Domain, UBS analysts pointed to improving property market conditions, writing ‘Whilst acknowledging April was a messy month (Easter/ANZAC day) DHG noted a 'flat-lining' in new listing volumes in the last 10 days or so.’

Moreover, UBS said ‘DHG noted that both depth penetration (albeit at a slower rate than March) and average headline price had increased vs pcp.’

On Thursday UBS reiterated its Buy rating and $3.30 price target on DHG.

Qantas share price: liquidity remains strong

In the wake of Qantas (QAN) tapping the markets for an additional $550 million in debt funding, reassuringly for current shareholders, UBS posited that it is now unlikely that the airline will have to raise fresh equity.

‘In theory, the company could now last until the end of 2021 on its current liquidity position.’

Looking forward, given that Qantas has long benefitted from Australia’s domestic airline structure, the investment bank further noted that the next potential share price catalyst for QAN relates to Virgin Australia’s current voluntary administration proceedings.

‘Given the process is expected to come to a conclusion in the next 7 weeks; we see this as the next catalyst for Qantas,’ UBS said.

UBS currently has a $4.65 price target and Buy rating on Qantas.

JB Hi-Fi share price: risks remain priced-in

Though the coronavirus (Covid-19) has significantly disrupted the business operations of Domain and Qantas, JB Hi-Fi (JBH) has managed to maintain its sales momentum in recent months.

Specifically, this week the electronics retailer noted that 'the Group saw an acceleration in sales in late March as customers prepared for a potential increase in government restrictions.'

JBH recorded sales growth of 11.6% across its Australian business unit during the third quarter, bringing total year-to-date sales growth to an impressive 6.9%.

Though UBS sees growth slowing, the investment bank ultimately believe that JBH’s medium-term outlook is strong.

Overall, the expectation is for the retailer’s ‘growth to moderate / decline in the next 3 quarters. However, with ~90% of JBH’s valuation from cash-flow beyond FY21, we believe near term risks are more than priced in,’ UBS said.

The investment bank currently has a Buy rating and a 12-month price target of $40.00 on JBH.

How to trade ASX 200 shares: long or short

You can use CFDs to trade any of the ASX-listed shares we have discussed today – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Qantas, follow these easy steps:

• Create an IG Trading Account or log in to your existing account
• Enter ‘QAN’ or ‘Qantas’ in the search bar and select it
• Choose your position size
• Click on ‘buy’ or ‘sell’ in the deal ticket
• Confirm the trade