Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Afterpay Ltd (ASX: APT)

According to a note out of Ord Minnett, its analysts have retained their buy rating and lifted their price target materially on this payments company’s shares to $64.70. The broker has been looking through recent data and has made positive revisions. It now believes Afterpay could report almost 10 million active customers by the end of FY 2020. This will be more than double the 4.6 million active customers it had at the end of FY 2019. While it is a high risk option due to its valuation, I agree that Afterpay is a buy.

SEEK Limited (ASX: SEK)

A note out of UBS reveals that its analysts have upgraded this job listings company’s shares to a buy rating with a $23.00 price target. UBS made the move on the belief that the worst is now behind the company and that job volumes have started their recovery. The broker also notes that SEEK’s shares look good value in comparison to other online listings companies. I agree with UBS and feel SEEK would be a great buy and hold investment.

Woodside Petroleum Limited (ASX: WPL)

Analysts at Goldman Sachs have reaffirmed their buy rating and $33.85 price target on this energy producer’s shares. According to the note, the broker believes that Woodside is well-positioned in this low oil price environment due to its low cost operations and its strong balance sheet. Based on its last close price, Goldman’s price target implies potential upside of 55.6% for its shares over the next 12 months. I think this could certainly make it worth considering.

More reading

• Brokers just upgraded these ASX 200 stocks to “buy” today
• ASX tech shares: 2 exciting small caps to watch closely
• Why Adairs, Nick Scali, SEEK, & Splitit shares are storming higher
• 3 quality ASX shares to buy now to get rich later
• Why a2 Milk, Afterpay, and Pushpay shares just hit record highs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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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At lunch on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to finish the week on a very positive note. The benchmark index is currently up 0.9% to 5,989.5 points.

Here’s what has been happening on the market today:

Big four banks back on form.

The big four banks are back on form and are helping drive the ASX 200 higher. All four banks are pushing higher today, but the Westpac Banking Corp (ASX: WBC) share price is the best performer with a 1.5% gain. Incidentally, earlier this week Citi put a buy rating and $26.00 price target on the bank’s shares. This could be lending some support to the buy side.

Orora goes ex-dividend.

The Orora Ltd (ASX: ORA) share price has failed to follow the market higher and crashed 16% lower today. The majority of this decline is due to the packaging company’s shares trading ex-dividend this morning for its massive special dividend. Eligible shareholders can look forward to receiving the 37.3 cents per share dividend in their bank accounts in 10 days on 29 June 2020. This was the equivalent of a 15% yield based on its last close price.

Appen hits record high.

A number of shares have been hitting record highs this week. One that has achieved this feat on Friday has been the Appen Ltd (ASX: APX) share price. This morning the artificial intelligence company’s shares rose over 3% to $33.49. This latest gain means that Appen’s shares are now up over 50% since the start of the year. Earlier this week analysts at Macquarie initiated coverage on Appen with an outperform rating and $38.00 price target.

Best and worst ASX 200 shares.

The best performer on the ASX 200 on Friday has been the Estia Health Ltd (ASX: EHE) share price with an 8.5% gain. This is despite there being no news out of the aged care operator. The worst performer by some distance today has been the Orora share price with its 16% decline. This was triggered by its shares going ex-dividend this morning.

More reading

• Brokers just upgraded these ASX 200 stocks to “buy” today
• Is the Downer EDI share price in the buy zone?
• Why Air NZ, Evolution, Orora, & Suncorp shares are dropping lower
• Looking to buy ASX technology shares? Here are 4 to consider
• Where to invest for reliable dividend shares

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of Appen 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.

The post ASX 200 up 0.9%: Big four banks rebound, Appen hits record high appeared first on Motley Fool Australia.

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Shares in the ‘jack of all trades’ engineering contractor Downer EDI Limited (ASX: DOW) are up by 1.27% in morning trade today to $4.79, following the performance of the S&P/ASX200 Index (ASX: XJO) more broadly.

An often forgotten company that features widespread operations across multiple industries, Downer’s share price remains approximately 50% lower than its peak at $8.94 in January.

Let’s break down why the market has fallen out of favour with this blue-chip powerhouse, and why I see the company as a significant buying opportunity for long-term investors.

What are the current headwinds facing Downer EDI?

As one of the largest companies in Australia with some 53,000 employees, Downer has been a profound victim of the COVID-19 pandemic and its restrictive impacts.

One of the biggest laggards on its operations has been the Spotless Group, an integrated services company in which Downer maintains an 88% stake. Spotless has come to a virtual standstill due to its formidable exposure to catering, hospitality and laundry services.

According to a presentation delivered by Downer at the 2020 Macquarie Australia Conference last month, hospitality revenue for Spotless had been slashed to zero and up to 6,000 employees had been stood down without the JobKeeper stimulus due to the pandemic. This revenue hole was further expanded by the news Spotless was dealing with vastly reduced volumes of laundry from private hospitals due to the decline of elective surgeries.

Apart from the Spotless shortfall, the presentation also revealed that the Downer brand was facing a mine closure in South Africa, and a 70% reduction in productivity spurred by severe lockdowns for New Zealand activities.

Overall, it appears as though the impressive breadth of the company’s operations across several industries has been deeply challenged by the unprecedented COVID-19 pandemic, forcing the share price to bottom out at $2.58 in March. This would have been an agonising period for existing shareholders, who were also hit with the news of Downer deferring its dividend until September this year.

Future outlook – what I like about Downer EDI  

Notwithstanding these challenges, I remain optimistic about the company’s financial performance in FY21 and beyond. Firstly, its balance sheet is bursting at the seams. This has been aided by its financing of a $500 million syndicated bank facility, adding to the already half billion in cash and $1.14 billion of undrawn debt the company held at the end of 2019.

Secondly, coupled with its supreme liquidity, Downer’s longstanding government customer base also ensures it is a likely beneficiary of government stimulus and new infrastructure projects under the JobMaker program. The expertise of the company to deliver high-level transport projects and general urban services likely puts them in good stead to benefit from new government contracts under JobMaker and beyond.

Thirdly, the company’s earnings hit in FY20 will likely be short-lived. Spotless will likely revive its capacity at some point in the coming months, albeit under the caveat of greater social-distancing and hygiene restrictions, and the incidence of elective surgeries already appears to be recovering.

Notably, Downer announced in May that its relationship with Fortescue Metals Group Limited (ASX: FMG) had been extended through a confirmed $450 million agreement at the Eliwana iron ore mine in Western Australia. This 5-year arrangement is the second transaction between the pair, and represents Downer’s broader strategy of utilising existing contracts to expand on subsequent work for its clients.

The Fortescue deal adds to Downer’s impressive current project portfolio, which includes the delivery of the Auckland City Rail Link, railway vehicles including the Sydney Waratah and Melbourne Metro train fleets, and light-rail projects in Parramatta and the Gold Coast.

With plenty of new and existing work on the horizon and a historical dividend yield of 5.8%, I believe the current Downer share price provides prospective investors with significant upside over the medium to long-term.

Foolish takeaway

This company has been equally helped and harmed by its unique exposure to such a wide array of industries throughout the COVID-19 pandemic. Yet, although its ownership of Spotless continues to be a thorn in Downer’s side, I remain optimistic that the company’s exposure to substantial government and private-sector infrastructure projects bodes well for the continued resurgence of the Downer share price.

More reading

• Brokers just upgraded these ASX 200 stocks to “buy” today
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Looking to buy ASX technology shares? Here are 4 to consider
• Where to invest for reliable dividend shares
• Why I would buy Telstra and these ASX 200 blue chip shares

Motley Fool contributor Toby Thomas has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Is the Downer EDI share price in the buy zone? appeared first on Motley Fool Australia.

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