Stock Pick

  • The latest ASX shares to be downgraded by top brokers

    Downgrade

    The Australian economy is emerging from the dreaded COVID-19 lockdown and the optimism is firing up the share market!

    The S&P/ASX 200 Index (Index:^AXJO) jumped 1.3% on Monday with all sectors finishing in the black, although the runup in share prices is forcing some brokers to downgrade some ASX shares.

    Bad news around the corner

    One of the latest stocks to be hit with a recommendation downgrade is building supplies group CSR Limited (ASX: CSR).

    Citigroup cut its rating on the stock to “neutral” from “buy” ahead of the group’s full year results tomorrow.

    This probably explains the 4% plunge in CSR’s share price to $3.38 even as the broader market rallied. This makes CSR the second worst performer on the ASX 200 today after Graincorp Ltd (ASX: GNC), which fell 4.2% to $3.45.

    Earnings hit from construction

    Citigroup is expecting CSR to post a 40% drop in underlying net profit to $111.1 million, which is 7% below consensus forecasts.

    You can blame the downturn in building construction for much of the damage, although the challenging medium-term outlook for its aluminium business isn’t helping either.

    “The outlook for CSR remains challenging, with top line headwinds in housing and aluminium businesses emerging,” said the broker.

    “This creates a high level of earnings pressure medium term and drives our underlying NPAT downgrades of ~50% in FY21e and FY22e.”

    Citi’s 12-month price target on the stock was lowered to $3.45 from $5.60 a share.

    Running out of puff

    Another to come under pressure today was the REA Group Limited (ASX: REA) share price.

    Shares in the online property classifieds group fell 1.8% to $93.46 after Credit Suisse downgraded the stock to “neutral” from “outperform”.

    The broker’s decision comes in the wake of the group’s quarterly earnings update that showed a 1% increase in revenue and 7% improvement in earnings before interest, tax, depreciation and amortisation (EBITDA).

    The top-line missed Credit Suisse’s forecast of around 5% while EBITDA was roughly in line.

    Fully priced

    “Given ~7% price increases, this implies the benefit from depth penetration for the quarter was minimal,” said the broker.

    “We lower our target price to A$94.50/share (prev A$94.80/share) to reflect the minor reductions to our forecasts.

    “We continue to expect a recovery in volumes from the low point expected over the next few months, but given the recent rally in the stock, we view the recovery as appropriately priced in.”

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    Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. 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.

    The post The latest ASX shares to be downgraded by top brokers appeared first on Motley Fool Australia.

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  • Is the Altium share price a buy?

    Cyber technology and software image

    The Altium Limited (ASX: ALU) share price has been up and down in 2020, but is it set to surge in the second half of the year?

    What’s been happening to the Altium share price?

    Altium is a software company that provides PC-based electronics design software for engineers who design printed circuit boards. It’s been something of a rollercoaster for the ASX tech company in 2020, with less international trade, reduced business expenditure and potential supply chain disruptions weighing heavily on the Altium share price in March.

    Altium is part of the WAAAX group of tech shares that have rocketed higher in recent years. While Altium does have a 1.03% dividend yield, much of its value is tied up in future expected growth. In fact, Altium trades at a price-to-earnings ratio of 59.82, which is why investors were spooked by the COVID-19 shutdown. 

    At the height of the February earnings season, Altium hit a new 52-week high of $42.76 per share. It was downhill from there as the S&P/ASX 200 Index (ASX: XJO) slumped amid a broader bear market. The Altium share price fell to a 52-week low of $23.11 per share before recovering to its current $36.79 valuation.

    Is Altium in the ‘buy zone’?

    It’s been an impressive share price recovery for Altium in April and May. Altium is still trading below its pre-COVID-19 value but the economic outlook has certainly shifted. I personally don’t think Altium’s valuation is compelling enough to buy right now.

    If we see another bear market drop then I’d look at buying Altium for the right price, however, I think there are other strong ASX tech shares that could be in the buy zone, like Xero Limited (ASX: XRO).

    Foolish takeaway

    The Altium share price has been on a rollercoaster ride this year. Altium is a dividend-paying share that does provide some security, but I still think I’ll wait for another market dip before buying in.

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    Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. 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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  • ASX 200 starts the week strongly, up 1.3%

    ASX 200

    The S&P/ASX 200 Index (ASX: XJO) went up 1.3%, it started the week strongly. Investors are feeling more confident about the situation now that restrictions are starting to lift.

    Whilst Australia’s leaders are telling people not to get complacent, various rules around the country are starting to become a bit more relaxed.

    Here are some of the highlights from the ASX 200 today:

    Large ASX 200 share price gains

    Some ASX 200 businesses saw share prices rise considerably today.

    The share price of Webjet Limited (ASX: WEB) rose by 19.5%.

    Southern Cross Media Group Ltd (ASX: SXL) saw its share price go up 18.5%.

    The share price of NRW Holdings Limited (ASX: NWH) grew by 12.2%.

    AP Eagers Ltd (ASX: APE) saw its share price rise by 10.8%.

    Cochlear Limited (ASX: COH)

    The ASX 200 hearing device business saw a 5% rise in its share price today despite outlining a significant fall in revenue.

    Compared to April 2019, sales revenue across the company declined 60% in April 2020. Cochlear implant unit sales fell by 80% across developed markets, with most elective surgeries postponed across the US and Western Europe.

    The bright spot was China where surgeries recommenced in late February and continued to recover throughout April. Surgeries are now running close to pre-virus run rates despite Beijing, the largest surgery centre, remaining largely closed to elective surgery.

    Suncorp Group Ltd (ASX: SUN)

    The ASX 200 financial business saw its share price rise 4.2% today after also giving an update.

    It was announced CEO of Banking and Wealth Lee Hatton will be leaving the organisation at the end of the month.

    At 31 March 2020 it had excess group common equity tier 1 (CET1) capital of $682 million at 31 March 2020.

    On the insurance side of things Suncorp is expecting gross written premiums to be impacted by lower economic activity, however it’s expecting lower consumer motor claims volumes. It said it’s expecting increased landlord loss of rent claims.

    The final dividend will be considered though the year end process.

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    Returns as of 6/5/2020

    Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Cochlear Ltd. 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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