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On Wednesday 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 ASX shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

According to a note out of Citi, its analysts have retained their sell rating but increased the price target on this medical device company’s shares to NZ$26.25 (A$24.95). This follows the release of its half year results on Wednesday. Although the broker was impressed with its result and believes its Hospital segment is well-placed for very strong growth over the 2020s, it has issues with its valuation and believes its shares are overvalued. The Fisher & Paykel Healthcare share price is trading at $31.07 this afternoon.

Magellan Financial Group Ltd (ASX: MFG)

Analysts at Morgan Stanley have retained their underweight rating and $48.00 price target on this fund manager’s shares. According to the note, given Magellan’s focus on growth, it has concerns that its performance could be impacted by the recent rotation to value options. It doesn’t believe this has been factored into the current share price and fears there could be downside risk in the near term. The Magellan share price is changing hands for $61.09 today.

Xero Limited (ASX: XRO)

A note out of UBS reveals that its analysts have retained their sell rating and $77.00 price target on this cloud-based business and accounting software platform provider’s shares. This follows the announcement of a US$600 million (later upsized to US$700 million) convertible notes offering. UBS was surprised by the size of the offering and believes it could be a sign that a significant acquisition is coming. While this has the potential to be a positive, it isn’t enough for a change of rating. UBS believes its shares are still overvalued at the current level. The Xero share price is trading at $133.06 this afternoon.

More reading

• Broker tips Fisher & Paykel Healthcare (ASX:FPH) share price to go even higher
• ASX stock of the day: Platinum (ASX:PTM) shares up 6%
• 3 ASX shares with large dividend yields
• ASX 200 up 0.8%: Fisher & Paykel Healthcare impresses, Harvey Norman’s profits surge
• Why Mesoblast, Temple & Webster, Xero, & Zip shares are dropping lower

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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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The AnteoTech Ltd (ASX: ADO) share price is rocketing higher today. This comes after the company announced a design freeze on its COVID-19 Antigen Rapid Test (ART) following successful results. At the time of writing, the Anteotech share price is up 28.21% to 10 cents.

What’s driving the AnteoTech share price?

The AnteoTech share price is having a stellar day today after the company advised it has completed the final design of its COVID-19 ART.

According to the release, the company completed its development processes for the product within time and budget constraints. While traditional methods of testing COVID-19 is done through a nasal swab, AnteoTech conducted successful testing on human saliva.

Undertaken in a laboratory, the company took artificial mucus and placed inactivated SARS-CoV-2 virus within it. The test simulated real-world examples with seven different viral loads used. To ensure consistency within the results, each viral load was tested six times. The process of taking a sample on the COVID-19 ART took 15 minutes with less than one minute to produce a result on the reader.

Contract news

AnteoTech revealed that it has signed key supply agreements to manufacture its products at multiple sites. Tapping into the overseas market, the company signed a memorandum of understanding (MOU) with Spain’s Operon for a detailed manufacturing contract. It is anticipated the agreement will be signed in 2021.

In addition, discussions have commenced with Ellume to manufacture its products in Brisbane, Australia. As talks are ongoing, it’s expected that the prior work completed with Operon will support planning requirements with Ellume.

Lastly, AnteoTech stated that the Therapeutic Goods Administration (TGA) in Australia has approved clinical trials for its COVID-19 ART. Talks are progressing with the Victorian Infectious Diseases Reference Laboratory (VIDRL), with the study expected to begin in December.

What did management say?

AnteoTech CEO, Mr Derek Thomson, commented on the positive achievement and further developments, saying:

This is an exciting and timely development in the rollout of our COVID-19 Antigen Rapid Test. A saliva test is a less invasive and more comfortable test for patients, and only a few have been successfully developed and commercialised.

The next phase is to validate our results in a clinical trial, and we are now seeking trial sites and collaboration partners for this step. If the results of the saliva trial are favourable and available in time, we are aiming to submit an approval application to the Therapeutic Goods Administration for a COVID-19 ART test capable of using either/or saliva and nasopharyngeal swab samples.

AnteoTech market outlook

As pharmaceutical companies advance their development for a COVID-19 vaccine, AnteoTech believes rapid testing will still be needed. This is on the basis that, while a vaccine may prevent community transmission, the future is unknown regarding its effectiveness.

In light of this, the company predicts population screening in commercial and social gatherings could become mandatory. It states that testing will likely become the norm for people to travel across countries, whether it be for business or leisure.

More reading

• With the Moderna share price blasting up, have the forward-looking markets got it right?
• Why Aroa Biosurgery, Straker, Virgin Money, & Whitehaven shares are dropping lower
• 3 reasons the ASX 200 could soar to new record highs
• Why Harvey Norman, Northern Star, Stockland, & TechnologyOne shares are charging higher
• Why the Jumbo (ASX:JIN) share price is rising again today

Motley Fool contributor Aaron Teboneras 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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The Moderna Inc (NASDAQ: MRNA) share price went like gangbusters yesterday, overnight Aussie time. The US biotech company’s share price leapt 10.8%. And its up another 3.8% in afterhours trading.

This comes as investors eagerly anticipate the outcome of the final analysis of Moderna’s promising COVID-19 vaccine trial.

Earlier this month, Moderna joined Pfizer Inc. (NYSE: PFE) and BioNTech SE (NASDAQ: BNTX) in a globally exclusive club when the company announced its vaccine looked to be 95% effective in its extensive trial. One which encompassed 30,000 people.

Moderna’s share price is now up 62% so far in November, and 468% so far in 2020. At the current share price, Moderna has a market cap of $48 billion.

What does Moderna do?

Based in the United States city of Cambridge, Massachusetts, Moderna is a biotechnology company. The company focuses on developing and discovering new drugs and vaccine technologies based on messenger RNA. Moderna’s technology platform inserts synthetic mRNA into human cells.

Why did the Moderna’s share price leap 11% overnight?

Moderna’s share price has been steadily moving higher on a series of positive announcements from the company.

Among those, the US has committed to buying 100 million doses of its vaccine, mRNA-1273, provided it wins emergency use approval. And it’s not just the US.

Japan has agreed to buy 50 million doses, Canada wants 20 million and, in the latest development, the European Commission agreed to buy 80 million doses with an option to double that to 160 million. That agreement remains subject to European approval of the vaccine.

The 10.8% share price leap overnight comes as Moderna expects to release the final data from its expansive trial within the next week. Should the vaccine’s efficacy prove to be in the 94.5% range as initially reported, Moderna will then file for emergency use authorisation with the US Food and Drug Administration (FDA).

If it gains approval, Moderna’s vaccine could begin mass distribution just as global infection rates are rocketing to new levels. Hence the big share price surge.

Share markets are said to be forward looking. Meaning they anticipate tomorrow’s news today.

With more than 588,000 new infections reported on Tuesday, 24 March, and global cases exceeding 60.2 million with 1.4 million fatalities, let’s all hope the market’s got this one right!

More reading

• Here are the US shares that CommSec customers are buying
• ASX energy shares surge ahead as oil rises to 9-month high
• Here’s why Moderna’s coronavirus vaccine could outsell Pfizer’s
• New data shows higher efficacy rate for Pfizer and BioNTech coronavirus vaccine candidate
• Here are the US shares that CommSec customers are buying

Motley Fool contributor Bernd Struben 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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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) could be about to end its winning streak. The benchmark index is currently down 0.15% to 6,673.1 points.

Four shares that have fallen more than most today are listed below. Here’s why they are dropping lower:

Aroa Biosurgery Ltd (ASX: ARX)

The Aroa Biosurgery share price is down 3.5% to $1.27 following the release of its half year results. This morning the soft tissue regeneration company reported a 10% decline in revenue to NZ$9 million because of the pandemic. Things were worse for its earnings, with normalised earnings before interest, tax, depreciation, and amortisation (EBITDA) coming in at a loss of NZ$2.3 million. This compares to positive EBITDA of NZ$2.15 million a year earlier. Management expects to deliver revenue growth in the second half as restrictions ease. This will bring its FY 2021 revenue to at least NZ$21 million.

Straker Translations Ltd (ASX: STG)

The Straker Translations share price is down 6.5% to $1.49. Investors have been selling the translation services company’s shares after the release of its half year results this morning. Straker delivered a 9% increase in revenue to NZ$14.8 million and a small operating profit. It appears as though some investors were expecting a stronger result.

Virgin Money UK CDI (ASX: VUK)

The Virgin Money UK share price has crashed 9.5% lower to $2.35. This follows the release of its full year results this morning. For the 12 months ended 30 September, the UK-based bank posted a 77% decline in full year underlying net profit to 124 million pounds. This was driven largely by a huge increase in impairments to 501 million pounds from 153 million pounds in FY 2019. Excluding impairments, operating profit fell 10% to 625 million pounds due to weakening margins and base rate cuts.

Whitehaven Coal Ltd (ASX: WHC)

The Whitehaven share price has fallen 3.5% to $1.49. This may be due to reports that China is claiming that there is a quality problem with Australian coal. It currently has $700 million worth of the commodity sitting off the coast of two major Chinese ports after banning Australian coal imports in October.

More reading

• ASX 200 flat: Bega Cheese announces major acquisition, WiseTech reaffirms guidance
• Straker Translations (ASX:STG) share price flat after half year results release
• Aroa Biosurgery (ASX:ARX) share price falls as revenue declines
• The real earnings growth driver for ASX bank stocks in FY21 isn’t what you think
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Straker Translations. 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 Why Aroa Biosurgery, Straker, Virgin Money, & Whitehaven shares are dropping lower appeared first on Motley Fool Australia.

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One of the biggest concerns I hear from retail investors is that ASX share prices are looking frothy.

Meaning that that the price-to-earnings (P/E) ratio of many ASX shares is running higher than their historical averages.

As you probably know, the P/E ratio is a way to measure a company’s current share price compared to its earnings-per-share (EPS).

For example, if a stock is trading for $18 and earning $1 per share, the P/E ratio is 18 times.

Now I use 18 for a reason here.

Andrew McAuley is the chief investment officer for Credit Suisse Group‘s (NYSE: CS) Australian Private Banking arm. And, as the Australian Financial Review reports, he calculates the 12-month forward P/E ratio for the S&P/ASX 200 Index (ASX: XJO) is 18 times. (The forward P/E ratio utilises estimated future earnings.)

McAuley says that’s 20% higher than the 10-year average for the ASX 200. Additionally, he notes that the MSCI World Index, with a forward P/E of 21.2 times, is 40% above its historical average.

So, investors aren’t off base when they mention share prices, overall, appear a bit frothy.

Which brings us to the first reason on ASX 200 share prices (and indeed, those across most global indices) could run far higher from here.

Reason 1

Rock bottom interest rates.

Interest rates in Australia are so low, in fact, that when you take inflation into account, the Reserve Bank of Australia’s (RBA) 0.1% official cash rate is effectively negative.

And RBA Governor, Philip Lowe, has made it clear the bank is highly unlikely to raise those rates anytime soon.

Credit Suisse’s McAuley points out that these record low rates are supporting the ASX and other share markets across the globe. And despite the elevated forward P/E ratios, he says, “If you look at the relative attractiveness of equities to bonds, the ASX still looks reasonable value.”

Reason 2

Low rates are one of the pillars supporting share markets during the pandemic-driven economic slowdown.

But as the global financial crisis (GFC) showed us in 2008, low rates alone aren’t enough. Back then, central banks the world over did cut rates. In Australia, the RBA slashed the official cash rate from 7.25% in August 2008 down to 3.0% by April 2009. (If only it had that much fire power left today!)

While rate cuts helped, governments largely held back with any fiscal stimulus. In fact, many nations went the other way, introducing austerity measures to rein in ballooning debt levels.

But this time is different.

Debt, with a nod of thanks to negative real (inflation adjusted) interest rates, has taken a back seat to spurring on locked down economies.

Which brings us to the second reason share prices on the ASX 200 could hit new record highs in the coming months.

Massive government stimulus packages.

Unlike the mismatched responses we saw during the GFC, the COVID-19 crisis has seen a coordinated approach between governments and their central banks. Governments the world over have unleashed trillions of dollars in stimulus spending and other support measures since the onset of the pandemic.

In Australia, JobKeeper and the boosted JobSeeker allowance have been crucial at keeping unemployment down and keeping money in consumers’ pockets.

Evan Brown, head of multi-asset strategy at UBS Asset Management, explains this combined approach from central banks and governments has opened the door to higher P/E ratios (quoted by Bloomberg):

There’s probably a higher floor to multiples because the market will know that as soon as we hit that recession, you’re getting not just the monetary policy offset but fiscal as well. And so what that does is cut off the left tail and leaves markets to explore higher multiples perhaps than would have been the baseline before.

Indeed…

Reason 3

The ASX 200 is populated, mostly, by quality companies with strong management and good growth outlooks.

Some ASX 200 shares, especially in the technology space, have actually benefitted from the changes inflicted by the virus as people shifted to working, shopping and socialising from home.

But many ASX 200 share prices remain depressed from their pre-COVID levels. That’s especially true in the travel and leisure sectors.

Which brings us to the third reason the ASX 200 could be poised to set new all-time highs.

The rollout of an effective vaccine.

November has delivered not one, but three potential vaccines, all reporting to be more than 90% effective in late stage trials.

Now even if all three are approved for mass production shortly, global vaccinations won’t happen overnight.

But as Mike Loewengart, managing director of investment strategy at E*Trade Financial, reminds us, markets are forward looking (quoted by Bloomberg):

We remain on fragile footing heading into the winter as cases continue to climb globally. And since the markets are forward looking, this data will likely be taken in stride. The markets tend to cheer on certainty so the presidential transition and vaccine developments are two factors it’s latched onto lately.

As for the outlook for the Aussie economy and the ASX?

Shane Oliver, AMP Capital’s head of investment strategy says (from the AFR):

The Australian economy and share market with their relatively high exposure to resources and financials are relatively cyclical in contrast to the US that has a higher exposure to ‘growth’ sectors like IT and healthcare. If the combination of a vaccine and global stimulus drives a strong global economic recovery in 2021 then the Australian economy, shares and Australian dollar are likely to be relative beneficiaries.

Down 0.3% in intraday trade, the ASX 200 needs to gain 7.49% to set a new record high.

More reading

• Why Harvey Norman, Northern Star, Stockland, & TechnologyOne shares are charging higher
• Why the Jumbo (ASX:JIN) share price is rising again today
• Stockland (ASX:SGP) share price up 3% after new chief announced
• ASX 200 flat: Bega Cheese announces major acquisition, WiseTech reaffirms guidance
• Is the Harvey Norman (ASX:HVN) share price good value?

Motley Fool contributor Bernd Struben 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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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to end its winning run. At the time of writing, the benchmark index is down 0.2% to 6,668.5 points.

Four shares that are not letting that hold them back are listed below. Here’s why they are charging higher:

Harvey Norman Holdings Limited (ASX: HVN)

The Harvey Norman share price is up 6% to $4.85. This follows a positive reaction from brokers to the retailer’s trading update yesterday. One broker that liked what it saw was Credit Suisse. This morning it retained its outperform rating and $5.06 price target on the company’s shares.

Northern Star Resources Ltd (ASX: NST) 

The Northern Star share price is up over 3% to $12.93. This appears to have been driven by a small recovery in the gold price and an update on its merger with Saracen Mineral Holdings Limited (ASX: SAR). That update revealed that all Northern Star financier consents and material Saracen facilities and relevant agreements consents required under their merger implementation deed have been obtained and are now satisfied. A number of other conditions, such as shareholder approval are still required. The Saracen share price is also up 3%.

Stockland Corporation Ltd (ASX: SGP)

The Stockland share price is up 2% to $1.65 after naming its new chief executive officer. The retail property company has appointed Lendlease Group (ASX: LLC) chief financial officer, Tarun Gupta, as its new leader. He will join the company in June 2021. Current CEO, Mark Steinert, is retiring from the role after over 7 years with the company.

TechnologyOne Ltd (ASX: TNE)

The TechnologyOne share price is up 4.5% to $9.45. Investors have been buying the enterprise software company’s shares after brokers responded positively to its full year results. Morgans has retained its add rating and lifted its price target to $9.99. TechnologyOne’s FY 2020 result was better than it expected and it was pleased with management’s positive commentary for the year ahead.

More reading

• Stockland (ASX:SGP) share price up 3% after new chief announced
• ASX 200 flat: Bega Cheese announces major acquisition, WiseTech reaffirms guidance
• Is the Harvey Norman (ASX:HVN) share price good value?
• Northern Star (ASX:NST) and Saracen (ASX:SAR) shares on watch after merger update
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro 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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The Jumbo Interactive Ltd (ASX: JIN) share price is inching higher today after the company announced it has secured a software licence approval in Great Britain. At the market open, the Jumbo share price originally jumped to $14.10 before retreating to $13.92 at the time of writing for a 0.07% gain so far today. This compares to S&P/ASX 200 Index (ASX: XJO) which is down 0.25% to 6,677 points in intraday trading.

What did Jumbo announce?

The Jumbo share price is creeping up following the company’s report that the Gambling Commission approved and issued a remote gambling software operating licence.

Jumbo will now begin to supply its software-as-a-service (SaaS) platform to licenced operators under the Gambling Commission’s umbrella. This will allow end-consumers to use Jumbo’s gambling and lottery services in Great Britain.

The newly approved software operating licence is an extension of Jumbo’s United Kingdom subsidiary, Gatherwell. The latter holds external lottery manager operating licences (remote and non-remote).

Pleasingly for the company, Jumbo stated that it is able to provide its UK market an increased offering. This includes both a SaaS platform, and a managed charities solution operated by Gatherwell.

What did management say?

Commenting on the positive announcement, Jumbo CEO and executive director, Mr Mike Veverka, said:

We are delighted to achieve this international expansion milestone which, together with our local subsidiary Gatherwell, will drive our growth strategy in the UK charities market. This is an important step in Jumbo expanding its footprint in the UK following the great work carried out by the Gatherwell team to date.

Addressable market

Jumbo revealed that there are currently 168,168 registered charities in England and Wales. These organisations had total estimated revenue inclusive of grants, donations, lotteries and other fundraising activities of 77.404 billion pounds as at 30 September 2018. According to Jumbo, its immediate addressable market is estimated at around 775 million pounds in lottery sales via ‘Society Lotteries’ and local authority lotteries.

This highlights the scope of opportunity that lies ahead if Jumbo can manage to substantially penetrate this market. 

About the Jumbo share price

The Jumbo share price has accelerated since the beginning of the month, delivering 28% gains for shareholders. While still materially down from its pre-COVID-19 levels of above $20, Jumbo has been focusing its strategy on digital expansion.

Should it be able to further harness consumers around the world onto its online platform, the Jumbo share price could shoot higher.

More reading

• Fundie names 5 ASX shares with good growth prospects
• Why Elders, Jumbo, Northern Star, & PolyNovo shares are charging higher
• Jumbo (ASX:JIN) share price on watch following signed Lotterywest agreement
• 2 ASX mid cap shares that are growing strongly
• Leading brokers name 3 ASX shares to buy today

Aaron Teboneras owns shares of Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive 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 Stockland Corporation Ltd (ASX: SGP) share price is up today after the company announced the appointment of a new chief executive officer.

Industry veteran Tarun Gupta will replace Mark Steinert, who has been at the helm since 2013 and announced his retirement from the company in June. At the time of writing, the Stockland share price is trading up 3.07% at $4.70.

Why is the Stockland share price lifting?

In announcing the appointment, Stockland said Mr Gupta would bring plenty of experience to the CEO position. He is the current chief financial officer at Lendlease Group (ASX:LLC), having first joined that company as a graduate and holding a variety of senior positions across 26 years.

Stockland described Mr Gupta as “the right man for the job”, with deep commercial experience and a proven track record in leading and managing large property operations. The company also said that Mr Gupta was highly regarded in the industry, and had a strong reputation among property investors. 

Mr Gupta will join Stockland on 1 June 2021, and Mr Steinart will remain as CEO until then. Meanwhile, Lendlease announced that its deputy chief financial officer, Frank Krile, will step into the group chief financial officer role on an interim basis.

Mr Gupta will earn a fixed remuneration of $1.5 million annually, in addition to long-term and short-term incentives.

Challenging times ahead for Stockland

Mr Gupta will join Stockland at a time of big challenges. 

More than half of the Stockland’s earnings comes from its retail property portfolio. Of Stockland’s 34 retail shopping centres, 24 are tenants in the challenged department store sector. The department store business model is under increasing pressure from online competition.

In addition, 9 of Stockland’s 34 sites include Target stores. Target owner Wesfarmers Ltd (ASX: WES) has announced plans to close half its Target stores or rebadge them as K-Mart. Given Stockland already has 14 K-Mart stores, 9 of them at the same locations as its Target stores, this could be challenging scenario for Stockland. 

How has the Stockland share price performed in 2020?

The Stockland share price has rebounded strongly after losing 60% of its value in March at the height of the coronavirus pandemic. At $4.70, the Stockland share price is now back to almost the same level it was at the beginning of the year. The company commands a market cap of $10.9 billion. 

More reading

• 3 ASX companies named and shamed as worst in industry
• Why these ASX 200 shares just hit record highs
• ASX stock winners from the $23 billion Victorian state budget
• Could Citi’s forecast spell good news for the Lendlease (ASX:LLC) share price?
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. 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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At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is running out of steam and threatening to end its winning streak. At the time of writing, the benchmark index is roughly flat at 6,678.1 points.

Here’s what is happening on the market today:

Bega Cheese announces major acquisition.

The Bega Cheese Ltd (ASX: BGA) share price is in a trading halt today whilst it aims to raise a total of $401 million via an underwritten entitlement offer and placement. The proceeds will be used to partly fund the acquisition of Lion Dairy & Drinks for $534 million. Lion Dairy & Drinks is the business behind a wide range of brands such as Dare, Farmers Union, Juice Brothers, Pura, and Yoplait. Management expects the acquisition to be double digit earnings per share accretive in FY 2022.

Virgin Money UK sinks.

The Virgin Money UK CDI (ASX: VUK) share price is sinking lower following the release of its full year results. For the 12 months ended 30 September, the UK-based bank reported a 77% drop in full year underlying pre-tax profit. This decline was driven largely by a sizeable 501 million pound impairment charge in relation to an expected surge in bad loans because of COVID-19. This led to analysts at Macquarie downgrading its shares to a neutral rating this morning. It has a $2.70 price target on its shares.

WiseTech Global reaffirms guidance.

The WiseTech Global Ltd (ASX: WTC) share price is pushing higher on Thursday after it reaffirmed its guidance for FY 2021. The logistics solutions company expects revenue of $470 million to $510 million and EBITDA of $155 million to $180 million. This represents growth of 9% to 19% and 22% to 42%, respectively. However, it is worth noting that the company has warned that the ongoing and longer-term impacts of COVID-19 are still not completely predictable.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Thursday has been the Harvey Norman Holdings Limited (ASX: HVN) share price with a 5.5% gain. This morning Credit Suisse retained its outperform rating and $5.06 price target in response to its trading update yesterday. The worst performer has been the Virgin Money UK with an 8% decline following its full year results release.

More reading

• Is the Harvey Norman (ASX:HVN) share price good value?
• Bega Cheese (ASX:BGA) announces $534 million Lion Dairy & Drinks acquisition
• Why the WiseTech Global (ASX:WTC) share price is climbing higher today
• The real earnings growth driver for ASX bank stocks in FY21 isn’t what you think
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. 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 Harvey Norman Holdings Limited (ASX: HVN) share price could still have room to grow according to one leading broker.

Who is positive on Harvey Norman?

A note out of Goldman Sachs this morning revealed that its analysts have retained their buy rating and put a $4.90 price target on this retail giant’s shares following the release of its annual general meeting update yesterday.

That update revealed that Harvey Norman’s aggregated sales revenue increased by 28.2% between 1 July and 21 November compared to the prior corresponding period. This has been driven by strong same store sales growth across almost all regions over the period.

Things were even better on the bottom line. Thanks to margin expansion, the company’s unaudited profit before tax for the period 1 July to 31 October was up a massive 160.1% on the prior corresponding period.

Goldman believes the company’s growth will inevitably slow in the second half but has increased its forecasts to account for stronger than expected sales trends and operating leverage.

It said: “We maintain our expectations that the strong growth seen over 2H20 and into 1H21 is unlikely to be sustained once the industry starts to cycle through the strong base in 2H21.”

“However, we revise sales forecasts to reflect the stronger ongoing sales trend and operating leverage resulting in EBIT revisions of +28.7% in FY21, but less significantly at +3.1% in FY22. Our revised PBT forecasts imply growth of +75.7% over the more significant Nov/Dec period, after +185.9% in Jul/Aug and +136.7% in Sep/Oct,” Goldman added.

Why buy Harvey Norman shares?

The broker sees Harvey Norman as a great option for income investors due to its generous yield.

It explained: “[its target price] now offering a potential total return of 15.7% driven by strong dividend yield support. We forecast HVN is trading at 13.8x PE and offers a 6.5% fully franked dividend yield in FY22. We maintain our Buy rating on HVN and the stock remains a preferred exposure in the discretionary retail sector.”

More reading

• ASX 200 up 0.8%: Fisher & Paykel Healthcare impresses, Harvey Norman’s profits surge
• Harvey Norman (ASX:HVN) share price higher on stellar sales update
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 Weekly Wrap: ASX continues to climb, despite outage
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro 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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