Month: February 2021

These are the latest ASX shares to be hit by broker downgrades

Downgrade ASX stocks

The market bounced from the Friday sell-off but this didn’t stop top brokers from downgrading a number of ASX shares today.

The S&P/ASX 200 Index (Index:^AXJO) jumped 1.5% in after lunch trade to 6,765 points with all sectors bar materials trading in the black.

Even the Orica Ltd (ASX: ORI) share price is recovering from its disappointing market update and the retirement of its chief executive.

Earnings getting blown down

The news was enough to prompt Macquarie Group Ltd (ASX: MQG) to downgrade the explosives and chemical maker to “neutral” from “outperform”.

The broker lowered its rating on the Orica share price after management warned that its first half earnings before interest and tax (EBIT) would take a $105 million to $125 million hit.

Impact from COVID-19 played a large part but the weak Chinese thermal coal market and unfavourable exchange rates also weighed.

Uncertainty prompts broker downgrade

“We lower our recommendation to Neutral, given the lack of earnings visibility, CEO transition and tightened balance sheet metrics,” said Macquarie.

“Investors are likely to focus on post-COVID earnings in FY22 and FY23; however, ORI needs to get through FY21 first.”

The broker’s 12-month price target on the Orica share price is $13.65 a share.

When good isn’t good enough

Another stock to be hit by a broker downgrade is the Harvey Norman Holdings Limited (ASX: HVN) share price.

Goldman Sachs lowered its recommendation on the Harvey Norman share price to “neutral” from “buy” even after the electronics and furniture retailer posted a solid profit result.

Harvey Norman has been a COVID winner with stuck-at-home consumers buying stuff for their homes.

Earnings upgraded but recommendation downgraded

The big rebound in the residential housing market is another boon for the Harvey Norman share price. New homes require new furniture.

Goldman lifted its net profit forecast for the group by 12.2% in FY21 due to pandemic spending and 17% in FY22 due to the housing boom.

“While the housing cycle is likely to provide some buffer to the earnings outlook over FY22 and FY23, the peak trading seen in the June quarter 2020 to March quarter 2021 are unlikely to be sustained, in our view,” said Goldman.

“Despite the upgrade, we forecast FY22 EBIT to decline 30% on FY21.”

The broker’s 12-month price target on the Harvey Norman share price is $5.10 a share.

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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Leading brokers name 3 ASX shares to buy today

Buy ASX shares

With so many shares to choose from on the ASX, it can be hard to decide which ones to buy. The good news is that brokers across the country are doing a lot of the hard work for you.

Three top ASX shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Afterpay Ltd (ASX: APT)

According to a note out of Ord Minnett, its analysts have retained their buy rating and lifted the price target on this payments company’s shares to $150.00. The broker made the move after Afterpay delivered further strong growth in the United States and United Kingdom during the first half. Looking ahead, Ord Minnett believes the launch of the Afterpay Money app will strengthen appeal to young consumers. The Afterpay share price is fetching $126.28 on Monday.

BWX Ltd (ASX: BWX)

A note out of Macquarie reveals that its analysts have retained their outperform rating and lifted their price target on this personal care products company’s shares to $5.30. According to the note, the broker was pleased with its half year results and guidance for the full year. It also notes that the company has signed a deal with Chemist Warehouse and Woolworths Group Ltd (ASX: WOW). The latter means its Sukin products are now ranged in Australia’s two largest supermarkets. The BWX share price is trading at $4.43 this afternoon.

Harvey Norman Holdings Limited (ASX: HVN)

Analysts at Citi have retained their buy rating and $6.00 price target on this retail giant’s shares following its first half results. According to the note, Harvey Norman delivered a strong half year update, which was in line with the broker expectations. And while its growth will slow in the second half, the broker still believes its shares offer value for money at the current level. The Harvey Norman share price is fetching $5.26 on Monday.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Is the NAB (ASX:NAB) share price a buy right now?

NAB Shares

The National Australia Bank Ltd (ASX: NAB) share price has gone up by more than 9% so far in 2021. Is it a buy right now? Some brokers have had their say.

What’s happening right now with NAB?

The NAB share price is moving about with a bit of volatility at the moment as markets react to the opposing thoughts about interest rates.

On the one hand, RBA governor boss Dr Lowe said that he doesn’t expect the official cash rate to rise for at least three years, unless the economy manages to recover sooner.

However, before today, bond yields had been climbing. The Australian Financial Review quoted Tamar Hamlyn from Ardea Investment Management:

The earlier part of the move was driven by rising inflation expectations because one of the components for bond yields is compensation for inflation. More recently, the increase in bond yields has continued and it has come about by an increase in real yields. If people think that economic growth is going to improve, then real returns – economic growth after inflation – are likely to improve across the entire economy because it’s easier to generate positive returns when the global economy is growing.

It was only a couple of weeks ago that the big four ASX bank released its FY21 first quarter update.

FY21 first quarter

The NAB share price responded positively after revealing it made $1.7 billion of statutory net profit and $1.65 billion of cash earnings.

NAB explained that improving economic trends have been a key driver of the first quarter result, with cash earnings 47% higher than the FY20 second half quarterly average primarily driven by low credit impairment charges. The bank said that at an underlying level, performance has been sound in the current competitive, low interest rate environment.

It said that it made 1% cash earnings growth compared to the first quarter of FY20. However, cash earnings before tax and credit impairment charges were down 6%.

But it still isn’t plain sailing yet, according to the bank’s CEO, Ross McEwan, who said:

Improving economic and health outcomes in Australia and New Zealand are encouraging, as are the reductions we are seeing in deferral balances. However, there are still a number of uncertainties regarding further clarity. These include the impact on customers of ongoing health alerts and measures put in place to contain the spread of COVID-19, and the wind-down of deferral and jobkeeper programs. Supporting customers and keeping the bank safe through this period remain our priorities.

Broker thoughts

UBS said that its cash net profit was better than expectations due to the fact that impairment charges were lower. It was the lowest impairment charge since it started giving quarterly earnings updates over a decade ago. Its balance sheet was stronger than expected, with a common equity tier 1 (CET1) capital ratio of 11.7%. UBS has a NAB share price target of $27.

Credit Suisse is another broker that has a share price target of $27 for NAB shares. The broker has decreased its expectations of bad debts for NAB, meaning it’s now expecting higher profit from NAB.

Both brokers think that NAB shares are currently a buy.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What’s with the Botanix (ASX:BOT) share price today?

asx share price fall represented by man shrugging in disbelief

Botanix Pharmaceuticals Ltd (ASX: BOT) shares are flat today following the company’s release of its FY21 half-year results on Friday night. At the time of writing, the Botanix share price is trading at 11 cents, the same price at which it closed Friday’s session. 

It seems the weekend has given shareholders plenty of time to digest the pharmaceutical cannabinoid company’s numbers, leaving them indifferent.

Botanix share price fails to ignite

Due to the pre-revenue nature of pharmaceutical development, Botanix is heavily reliant on non-operational income. And today, the Botanix share price is languishing after the company recorded a 14% decrease in its operational revenue to $88,871.

As a result, the company significantly reduced its expenditure during the half, particularly on employee benefits and research and development (R&D) expenses. The addition of a considerable $6.88 million R&D incentive scheme refund also enabled the company to deliver a profit of $664,129 for the half.

Botanix continued working on the development of its range of treatments including BTX 1801, BTX 1702, and BTX 1503. In February, the company announced positive data from its BTX 1801 Phase 2a nasal decolonisation proof of concept study.

Other news

Today, Botanix also announced the expansion of its management team with the addition of three new hires in the United States. The company advised the purpose of the new roles is to drive its antimicrobial and dermatology programs.

The new hires will assume the positions of chief medical officer, vice president, and head of commercial. These additions also come with the termination of executive director Michael Thurn.

Botanix mentioned in the announcement that recent positive data from its BTX 1801 antimicrobial study underpins the acceleration of the company’s commercial capabilities.

Botanix share price under the microscope

Botanix is in the clinical development of synthetic cannabinoid pharmaceuticals. The company’s primary focus is on dermatology and antimicrobial applications.

Despite the volatility, the S&P/ASX 200 Index (ASX: XJO) has now returned around 5.7% to investors in the past year. In comparison, the Botanix share price has netted shareholders more than 57% returns over the same period, a return nearly ten times that of the index.

However, in less positive news, Botanix shares have slipped by around 35% over the past month. 

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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