The latest ASX 200 stocks to be upgraded by top brokers

Our market staged a dramatic turnaround after losing ground in early trade, but two ASX stocks are in focus after leading brokers upgraded their recommendations on the these S&P/ASX 200 Index (Index:^AXJO) names.

Stocks getting upgraded to “buy” are worth watching in a market that is getting devoid of attractively priced opportunities.

But the rebound in the market from the early sell-off shows that investors are keen to put capital back to work.

Low hanging fruit

If you are in the same boat, Costa Group Holdings Ltd (ASX: CGC) may be worth putting on your watchlist, according to Morgans.

The broker upgraded the citrus and mushroom grower to “add” from “hold” after management’s trading update at its annual general meeting.

Despite the global impact from the COVID-19 fallout, Morgans reckons Costa provided a “solid” update.

Looking sweet despite COVID-19

Its international business is performing more strongly than expected, there’s good demand and pricing across most of its produce categories, it’s completed its Monarto mushroom expansion project and there’s a big improvement to water security at its farms.

 “With CGC’s International seasons now largely completed and the group’s overall EBITDASL materially weighted to the 1H (~70-80% skew), our focus is shifting to CGC’s prospects in FY21,” said the broker.

“Following recent widespread rainfall, the BOM’s favourable near-term outlook and general improvement in domestic produce prices/demand, CGC should enter FY21 in a much stronger position.”

Morgans lifted its price target on the stock to $3.60 from $3.05 a share.

Wrong timing

Meanwhile, Credit Suisse upgraded its call on Vicinity Centres (ASX: VCX) to “outperform” from “neutral” today as the stock went into a trading halt to announce a $1.4 billion cap raise.

The broker lifted its recommendation as it believes the bad news is largely in the price of the shopping centre owner’s stock and played down the need for management to do a dilutive capital raise.

Oops! Talk about bad timing!

One for the shopping basket?

However, the placement and share purchase plan (SPP) may not change Credit Suisse’s bullish turn on the stock as stores in malls are slowly but surely reopening.

“We note some of its peers have since reported ~80% of stores are now open as at the end of May. Smallto-medium enterprises (SME’s) represent an estimated 20-25% of income,” said the broker.

“As has been reported in the press, some larger tenants apparently have withheld rent—but we are not aware of any legal justification for doing so.”

Credit Suisse’s price target on Vicinity is $1.93 a share, but that’s likely to change once the broker factors in the cap raise.

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• 3 things that could impact ASX 200 shares this June

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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