The ASX share market is poised to rally for its third straight day but two stocks in particularly will be closely watched after they got a broker upgrade.
The futures market is tipping a 0.3% rise in the S&P/ASX 200 Index (Index:^AXJO) this morning thanks to positive leads from Wall Street.
But the embattled Insurance Australia Group Ltd (ASX: IAG) share price is in the spotlight after JPMorgan upgraded it to “overweight” from “neutral” today.
Why the IAG share price could rebound
This could help the IAG share price rebound from yesterday’s 4% sell-off due to contagion fears on the collapse of Greensill Capital.
The broker believes the big sell-off is overdone and that the fall represents a buying opportunity.
IAG issued a statement confirming it has no net insurance exposure related to Greensill entities and sold its 50% stake in the underwriting agency backing Greensill.
Less risky than thought
Several things will need to go wrong together for this to pose a risk to IAG, according to JPMorgan. This includes the collapse of Tokio Marine, which bought IAG’s stake.
That’s unlikely as Tokio Marine writes more than $50 billion in premiums each year. The broker thinks the fallout from Greensill is manageable for an insurer that size.
JPMorgan’s 12-month price target on the IAG share price is $5 a share.
Another ASX share upgraded to “buy”
Another ASX share that got upgraded by JPMorgan today is the Qantas Airways Limited (ASX: QAN) share price.
While the Qantas share price has taken off 12% over the past month, the broker believes there is more upside for the airline.
“We are in the early stages of a recovery and believe Qantas is well positioned both from a balance sheet and competitive position to come out of the crisis stronger,” said the broker.
“It has taken material costs out of the business with ~$1bn pa likely to be an ongoing savings from FY23.”
COVID loser to winner
The broker is forecasting Qantas to be cash flow positive again from the June quarter. It upgraded the Qantas share price to “overweight” from “neutral” and increased its 12-month price target by 50 cents to $6 a share.
While this puts Qantas shares at a slight premium to its historical valuation, JPMorgan thinks this is justified.
The COVID-19 pandemic has knocked off competition and Qantas appears to be in a stronger competitive position.
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
More reading
- 2 of the best ASX 200 blue chips to buy right now
- 5 things to watch on the ASX 200 on Wednesday
- ASX 200 rises, Afterpay sinks, Vocus jumps
- Should ASX 200 investors be worried about inflation? Janet Yellen isn’t…
- IAG (ASX:IAG) share price takes wild ride on Greensill fears
Motley Fool contributor Brendon Lau 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.
The post IAG (ASX:IAG) share price could jump with this other ASX share after a broker upgrade appeared first on The Motley Fool Australia.
from The Motley Fool Australia https://ift.tt/30pFHBI
Leave a Reply