On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX shares:

GPT Group (ASX: GPT)

According to a note out of Morgan Stanley, its analysts have retained their underweight rating and cut the price target on this property company’s shares to $4.00. This follows the release of a softer than expected first half result on Monday. In addition to this, the broker notes that GPT doesn’t expect to recover the majority of its uncollected rent. The GPT share price is currently trading below this price target at $3.92.

Medibank Private Ltd (ASX: MPL)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating and $2.83 price target on this private health insurer’s shares. This follows the release of an update from rival BUPA. It notes that BUPA’s ANZ business delivered a 4% increase in first half revenue but a 35% decline in underlying profit. BUPA also advised that it faces challenges in its Australian Health Insurance business. This is particularly the case with affordability issues. Goldman appears to see this as a sign that Medibank will continue to underperform. The Medibank share price is changing hands for $2.85.

Sonic Healthcare Limited (ASX: SHL)

Analysts at UBS have retained their sell rating and $28.00 price target on this global medical diagnostics company’s shares. According to the note, the broker expects Sonic to deliver a 10% increase in revenue but a 7% decline in earnings in FY 2020. In light of this, it believes its shares are overvalued at the current level and retains its sell rating. The Sonic share price is trading at $33.96 this afternoon.

More reading

• Has the CSL share price lost its ASX 200 market darling status?
• 3 dirt cheap ASX real estate shares
• The ASX stocks that could enjoy a consensus earnings upgrade this reporting season
• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges
• Results: GPT share price on watch as net profit falls 247%

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare 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.

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The Telstra Corporation Ltd (ASX: TLS) share price is going to be on watch this reporting season.

The telco is an interesting one. Its report is highly anticipated with everything that’s going on with COVID-19 at the moment.

There are some ASX blue chips that are likely to reveal a substantial profit hit because of COVID-19 like Commonwealth Bank of Australia (ASX: CBA). Whereas others like Wesfarmers Ltd (ASX: WES) seem to have had a strong year. Where will Telstra fall on this scale?

Telstra’s FY20 guidance

Before COVID-19, the company was expecting underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $7.4 billion to $7.9 billion.

In Telstra’s guidance update during the early part of COVID-19, it said it’s expecting both free cash flow and underlying EBITDA to be at the bottom end of its guidance. It’s also expecting its underlying EBITDA (excluding the in year NBN headwind) to be at the bottom end of its growth range of $0 to $500 million.

Whilst a reduction of profit expectations is not good news, I think that underlying profit being flat would be a good result considering all of the difficulties that Telstra has suffered this year.

Despite the profit difficulties, Telstra is expecting its capital expenditure to be at the top end of its guidance. The company is investing heavily in its new 5G network which will support the next generation of devices which will have very fast operating capabilities.

Where is the profit growth going to come from?

I think the only way for a business to deliver a sustainable increase in valuation is to increase the profit. The Telstra share price hasn’t done much over the past three years. 

In the FY20 half-year result it reported good growth in customer numbers, particularly with the mobile division. During the half year it added 137,000 retail postpaid mobile services (including 91,000 customers from Belong) 135,000 retail prepaid mobile services and 173,000 pre and postpaid and IoT wholesale services.

Adding new customers is essential for Telstra to maintain (let alone grow) its profit. The NBN is hurting Telstra’s profit due to the lower profit margin for each customer. Telstra used to own the cable infrastructure and earn a higher return.

5G services will hopefully add a lot more devices for Telstra’s network. Services like automated cars, wearables and so on will need a data connection to operate efficiently.

5G will need to be successful at attracting new customers if Telstra’s share price and earnings are going to rise from here. More 5G-capable devices are regularly being released by suppliers like Samsung and Apple, which will add to Telstra’s revenue base.  

I think 5G could be a turning point for Telstra’s home internet customers too. 5G may be so fast that customers made decide to switch from the NBN to 5G-enabled wireless internet. That wouldn’t be so good for the NBN’s earnings, but Telstra could benefit if its speeds and capacity are up to the challenge.

What about the Telstra dividend?

There has been a clear decline of the Telstra annual dividend over the past few years. It’s now paying an annual dividend of 16 cents per share, which includes the special dividends relating to the NBN payouts.

At the current Telstra share price it offers a grossed-up dividend yield of 6.75%. That’s not bad in this era of low interest rates. But I think income investors can do better than Telstra shares – either with better income growth or a higher starting yield. I don’t think the Telstra dividend is going to change over the next couple of years. For that reason I’d rather buy something like Future Generation Investment Company Ltd (ASX: FGX) or Vitalharvest Freehold Trust (ASX: VTH).

More reading

• These were last week’s best performing ASX shares
• ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
• 2 ASX dividend shares with generous yields to buy today
• Cash rate on hold until after 2022? Buy these ASX dividend shares
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers 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.

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If you are looking to expand your ASX share portfolio, here are 3 good options for you to take a look at.

Here’s why Ramsay Health Care Limited (ASX: RHC), Nanosonics Ltd. (ASX: NAN) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are all in my buy zone right now.

3 five-star ASX shares to buy this month

Ramsay

Ramsay has grown over the past few decades to become Australia largest private healthcare provider. The healthcare operator also now has a presence in 11 countries around the globe, including the United Kingdom, France and Italy.

The Ramsay share price took a significant hit during the early phase of the coronavirus pandemic. A ban on non-essential surgery, especially during February and March, was a significant reason for this. Since then its share price has only made a partial recovery.

While there could be further restrictions in some operating markets in the months ahead, eventually the pandemic will pass. I believe that Ramsay will be well positioned for long-term growth, driven by the growing global demand for quality hospital services over the next decade.

Nanosonics

Nanosonics is a niche healthcare product supplier. It manufactures and distributes a market-leading disinfection system for ultrasound probes. Over the past few years it has witnessed strong growth across Asia, Europe and the Middle East. Despite a dip in the early phase of the pandemic, Nanosonics has been a very strong ASX share price performer since beginning of 2019.

The company’s recent financial performance has been strong. Total revenue for the first half of FY20 was 19% up on the prior period to $48.5 million.

There is now an even stronger growing global trend towards stricter disinfection control in light of the coronavirus pandemic. I think this could help to push the Nanosonics share price even higher in the years ahead.

Soul Patts

Soul Patts has been a consistent performer on the ASX for over a decade now. Due to a strong level of market diversification, it is more resilient to economic downturns than many other ASX 200 shares.

The Soul Patts share price has lost a bit of ground since the beginning of the coronavirus pandemic. However, looking back over the past 10 years, the Soul Patts share price has risen strongly by 59%. I believe that Soul Patts is well placed to tap into its investments across a broad range of industries in the coming decade. These include pharmacies, telecommunications and mining.

Foolish takeaway

Ramsay, Nanosonics and Soul Patts are all high quality ASX shares that I believe have above-average growth prospects over the next 5 years.

More reading

• Has the CSL share price lost its ASX 200 market darling status?
• The ASX stocks that could enjoy a consensus earnings upgrade this reporting season
• These ASX healthcare shares could be fantastic long term options
• Beat low interest rates with these ASX dividend shares
• Sigma share price jumps on $172 million deal

Phil Harpur owns shares of Nanosonics Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Nanosonics Limited and Ramsay Health Care 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.

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The Archtis Ltd (ASX: AR9) share price has more than doubled in the past week.

Shares in Archtis are trading more than 15% higher for the day, capping an extraordinary week for the company. The Archtis share price closed at 28.5 cents last Tuesday and hit an all-time high of 60 cents earlier today.

Here’s why the Archtis share price is soaring.

What is fuelling the Archtis share price?

Archtis is an Australian-based cyber security technology company that specialises in the safe and secure sharing of classified information. In a bid to commercialise its services, Archtis launched its software-as-a-service (SaaS) Kojensi platform last year to service government, defence and commercial clients.

The company’s quarterly report released in late July has fuelled momentum in the Archtis share price.

In the report, Archtis noted important contract wins for the quarter. The company was able to secure its first defence industry contract for its Kojensi platform with global military system integrator Northrop Grumman. Archtis also secured its first contract in the education and space sector after closing a deal with Curtin University in May.

Archtis management said the new contracts highlighted the demand for the company’s Kojensi platform and demonstrated the commercialisation potential for its products.

The company has also renewed its $400,000 contract with the Australian Government.

Bullish outlook for Archtis

Analysts painted a bullish outlook on the Archtis share price in a recent research report from Lodge Partners. The report said the company was well-positioned to benefit from a range of domestic and international tailwinds such as the growing focus on cyber security.

One potential tailwind is the growth in defence and cybersecurity spending. Analysts noted the Federal Government’s $1.35 billion Cyber Enhanced Situational Awareness and Response package.

In addition, Archtis has also endeavoured to streamline the company’s board to push revenue growth in the future.

Foolish Takeaway

There’s plenty of momentum behind the Archtis share price, which is trading at 54 cents at the time of writing after hitting a record and intraday high if 60 cents earlier today.

More reading

• Analysts back archTIS share price to outperform

Motley Fool contributor Nikhil Gangaram 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.

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At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) is on course to record another strong gain. The benchmark index is currently up 1% to 6,168.8 points.

Here’s what is happening on the market today:

Challenger result and guidance disappoints.

The Challenger Ltd (ASX: CGF) share price has come under pressure on Tuesday after the release of its full year results. For the 12 months, the annuities company posted an 8% decline in normalised net profit before tax to $507 million. This excludes a significant negative investment experience relating to the COVID-19 pandemic market sell-off. Including this, Challenger recorded a statutory loss after tax of $416 million. Looking ahead, in FY 2021 Challenger expects to record a normalised net profit before tax in the range of $390 million to $440 million. This represents a 13.2% to 23% decline year on year.

A2 Milk Company shares lower on after announcing new CEO.

The A2 Milk Company Ltd (ASX: A2M) share price is trading lower on Tuesday after naming its new chief executive officer. The infant formula and fresh milk company has appointed David Bortolussi. He will replace interim CEO Geoffrey Babidge early in the 2021 calendar year. Mr Bortolussi was previously the Group President – International Innerwear, at HanesBrands. He has experience in the China market and also with M&A activities during his time with Fosters.

Sydney Airport to raise $2 billion.

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is in a trading halt today after launching a fully underwritten pro rata accelerated renounceable entitlement offer to raise $2 billion. Eligible securityholders will be able to acquire one new Sydney Airport share for every 5.15 shares held at a price of $4.56 per new share. The airport operator is raising funds to strengthen its balance sheet while it navigates an uncertain aviation market. Sydney Airport also revealed a loss after tax of $53.6 million for the first half.

Best and worst ASX 200 shares.

The James Hardie Industries plc (ASX: JHX) share price is the best performer on the ASX 200 on Tuesday with a 5.5% gain. This morning the building materials company posted an adjusted net operating profit (NOPAT) of US$89.3 million for the first quarter. This was in line with the prior corresponding period. The worst performer by some distance has been the Mesoblast limited (ASX: MSB) share price with a massive 20% decline. Investors may be nervous ahead of its meeting with the FDA on Thursday evening.

More reading

• ASX iron ore miners jump on broker upgrades
• Why Bendigo and Adelaide Bank, CIMIC, James Hardie, & Webjet are storming higher
• James Hardie share price jumps 5% after quarterly result
• Why Afterpay, Challenger, IVE Group, & Mesoblast shares are dropping lower
• Sydney Airport to raise $2 billion after COVID-19 profit collapse

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia owns shares of A2 Milk. 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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The Reckon Limited (ASX: RKN) share price has jumped 8.8% this morning after the software business released its half year results and announced a merger involving its legal group. The rise in the Reckon share price was prompted by resilient results for the six months to 30 June 2020 which reflected growth despite the impact of the COVID-19 pandemic. 

What does Reckon do? 

Reckon’s Business Group provides accounting, payroll, and point of sale software to businesses on a subscription basis. The Practice Management Groups provide practice management software to accounting and legal firms. Running a software-as-a-service (SaaS) business model, Reckon reports that 94% of revenue is now subscription revenue. 

How did Reckon perform? 

Reckon recorded resilient results for 1H20. Group revenue grew by 2% over the prior corresponding period driven by strong growth in the Business Group. The Business Group saw a 6% increase in revenue for the half, with cloud revenue growing strongly. Cloud revenue was up 23% with the number of cloud users reaching 87,000, up 41%. A free payroll app was launched in May and already has over 35,000 users. The paid app launched at the same time has over 2,000 users. Other mobile apps are planned for launch in the second half to continue the cloud/mobile strategy. 

In the accounting Practice Management Group, the customer base showed great stability with Reckon’s product entrenched as a product of choice among major accounting firms. New revenue growth was hampered by the pandemic as the division relies on on-site sales and installation activity. It was a similar situation for the legal Practice Management Group – the customer base was stable but new revenue growth was flattened by COVID-19. Nonetheless, Reckon says the sales pipeline remains strong. 

What about the merger? 

Reckon has announced it will by merging its Legal Group with Zebraworks, a United States based start up developing an integration platform to move legal firms to the cloud. The combined business will target the US legal practice management industry, providing Reckon with the opportunity to expand the smallest part of the group. Reckon will own 70% of the merged entity with all Zebraworks IP and other assets rolled into the merged entity. Reckon CEO Sam Allert said, “We have given serious consideration to the future strategy for the Legal Group and we now are excited to see this come to fruition… We look forward to executing on the potential of the merged entity in a substantial global market.” 

About the Reckon share price

At the time of writing, the Reckon share price is trading at 74 cents which is an 85% increase on its March low of 40 cents. The Reckon share price is, however, still 3.9% down in year-to-date trading.

More reading

• Is the Telstra share price a buy?
• 3 quality ASX shares to buy in August
• The Archtis share price has doubled in a week! Here’s why
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
• ASX iron ore miners jump on broker upgrades

Motley Fool contributor Kate O’Brien 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.

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Shares in the major ASX iron ore miners are jumping this morning after brokers upgraded their forecasts for the commodity.

The Rio Tinto Limited (ASX: RIO) share price rallied 1.8% to $103.80, BHP Group Ltd (ASX: BHP) share price added 1.3% to $40.36 and the Fortescue Metals Group Limited (ASX: FMG) gained 1.2% to $18.72 at the time of writing.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) jumped 0.7% as the profit reporting season started a little better than expected.

Iron ore forecasts upgrade

The outperformance of the iron ore miners today comes on the back of an ever-brightening outlook for iron ore.

Bank of America (BoA) upgraded its forecast for the steel-making ingredient through to 2024, reported the Australian Financial Review.

The bank lifted its calendar 2020 estimates to US$96.70 a tonne from US$86 and its 2021 forecast to US$85 from US$71.30.

BoA’s forecast was also increased to US$75 from US$65 in 2022, while its estimates for 2023 and 2024 were revised up to US$71.70 (from US$65.10) and US$68.50 (from US$65.10), respectively.

The price of the ore is currently trading around US$118 a tonne.

What’s driving iron ore upgrade

The two key reasons for the more bullish outlook. The drop in production at Brazilian miner Vale SA due to COVID-19 and robust demand for steel in China.

Meanwhile, JP Morgan turned even more bullish on the commodity as it upgraded its 2021 forecast by 19% to US$100 a tonne. It also upped its 2022 estimates by 10% to US$86.

The broker’s initial worries that the iron ore price will ease as Vale overcomes its production issues have been put aside.

Demand outpacing supply increase

The miner managed to increase output to around one million tonnes a day but JP Morgan thinks this is as good as it will get for the next 12 months.

“The Vale recovery was previously seen as a catalyst to see iron ore prices trade lower,” said the broker.

“However, with the production now back in the market, and iron ore continuing to rally.

“We are now starting to think prices could remain well above cost curve support levels until Simandou comes to market, which could be 5-7yrs away.”

Valuation upgrades for ASX miners

This led to valuation upgrades for the three big ASX miners, although the broker thinks BHP and RIO represents better value than Fortescue.

The FMG share price outperformed with around a 70% jump since the start of the calendar year while the BHP share price and RIO share price are largely flat.

JP Morgan is recommending BHP and RIO as “overweight” (or buy) with a price target of $43 and $120 a share, respectively.

Fortescue is rated “neutral” with a price target of $18.60 a share.

More reading

• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
• Are ASX lithium shares the next big thing?
• 3 tips for beginners investing in ASX shares
• Where is the Bega Cheese share price headed in August?
• Is the Origin Energy share price cheap or will it keep falling?

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is pushing higher again. At the time of writing the benchmark index is up 1% to 6,170.1 points.

Four shares that have climbed more than most today are listed below. Here’s why they are storming higher:

The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is up 4.5% to $7.18. Investors have been returning to the banks again on Tuesday and driving their shares higher. In addition to this, Bendigo and Adelaide Bank was the subject of a broker note out of Goldman Sachs on Monday. Although the broker only retained its neutral rating, its price target of $8.14 is notably higher than where it trades today.

The CIMIC Group Ltd (ASX: CIM) share price has climbed 4% to $23.65. This follows the second contract update in as many days by the engineering company. According to the release, CIMIC’s CPB Contractors business has been awarded two contracts for resources and water projects located in Western Australia and Queensland. These contracts are worth approximately $128 million in revenue.

The James Hardie Industries plc (ASX: JHX) share price has stormed 5% higher to $31.61. This follows the release of the building materials company’s first quarter update. James Hardie reported an adjusted net operating profit (NOPAT) of US$89.3 million, which was in line with the prior corresponding period. For the full year, James Hardie expects an adjusted NOPAT of US$330 million to US$390 million.

The Webjet Limited (ASX: WEB) share price has jumped 7% to $3.47. A number of travel companies have been pushing higher on Tuesday. Investors may believe the recent weakness in the sector has brought them down to attractive levels. It won’t be long until this is proven to be the case or not. Webjet is scheduled to release its eagerly anticipated full year results on Wednesday 19 August.

More reading

• James Hardie share price jumps 5% after quarterly result
• Earnings preview: What to expect from the Bendigo and Adelaide Bank FY 2020 result
• Why CIMIC, oOh!Media, ResMed, & Resolute shares are dropping lower
• These are the 10 most shorted shares on the ASX
• Is there a bull trap ahead for ASX shares like Webjet?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet 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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