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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More reading

• Is the Altium share price a buy?
• ASX 200 starts the week strongly, up 1.3%
• Start your week off with these 3 top Warren Buffett quotes
• Morgans warns investors to sell these ASX 200 shares in the rally
• Will high unemployment be the last straw for this ASX bull run?

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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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.

More reading

• The latest ASX shares to be downgraded by top brokers
• ASX 200 starts the week strongly, up 1.3%
• Start your week off with these 3 top Warren Buffett quotes
• Morgans warns investors to sell these ASX 200 shares in the rally
• 3 ASX growth shares to buy immediately with $3,000

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.

The post Is the Altium share price a buy? appeared first on Motley Fool Australia.

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