The ASX stocks the big brokers upgraded to buy this week, plus those they think have the most upside

Welcome back to our weekly check up on the biggest moves from the biggest brokers covering ASX stocks. June quarter reporting season for ASX mining companies is drawing to a close, and by the last day in our sample period (30 July), most of the majors have reported.

Gold miners Northern Star (ASX: NST) and Regis Resources (ASX: RRL) were mostly punished by brokers for their results. NST’s production figures were generally well received, but brokers baulked at the weaker than expected FY25 guidance issued in the update.

NST did manage to garner one rating upgrade from CLSA to outperform, but I propose the two downgrades it received from Jefferies and JP Morgan – both down from overweight/buy to neutral/hold are more telling. Also note that NST received 5 price target cuts averaging -5.5%.

The response to RRL’s quarterly update was far clearer, with four out of six of the brokers that issued updates choosing to cut their price targets. The average cut among them was -9.5%. Brokers acknowledged a reasonably strong production performance but did not like the company’s update on costs – both those flagged for the June quarter and guided for FY25.

Copper producer Sandfire Resources (ASX: SFR) delivered a generally well received quarterly update, with most brokers lauding the performance at its Motheo project in Botswana. This facilitated two rating upgrades, helping the skew of SFR’s broker ratings improve from 6-7 buy-hold before the update, to 8-5 afterwards. Price targets were generally trimmed, however, but only by a very modest -1.9%.

Sandfire Resources broker consensus before and after its June quarter update

Rare earths producer Lynas Rare Earths (ASX: LYC) also found itself in the spotlight this week. The brokers found two rating downgrades here, both from outperform/buy to hold. Brokers generally felt June quarter production numbers were disappointing amidst a backdrop of weak NdPR pricing.

Price targets changes for LYC were a little more mixed. Two increases from Bell Potter (retained buy), and JP Morgan (retained underweight), were overshadowed by six price target cuts. The average price target among the brokers dipped by 2.2%.

It was another tough week for ASX-listed lithium stocks. Whilst there two rating upgrades, (Mineral Resources (ASX: MIN) to outperform by CSLA and Pilbara Minerals (ASX: PLS) to neutral by Citi), price targets generally fell to reflect significantly poorer lithium minerals pricing. This is often referred to as “marking to market”.

PLS, MIN, and Liontown Resources (ASX: LTR) frequented this week's Price Target Changes Table, with the biggest cut reserved for MIN – a substantial 20% chop by CLSA to $60. PLS escaped with more modest price target cuts, but Citi’s near 10% cut to $2.90 doesn’t leave much room for upside.

Pilbara Minerals broker consensus before and after its June quarter update

There are plenty of other interesting broker moves for the period – and you can only get this level of detail on what they’re up to from us – so let’s dive in!

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How to read broker recommendations 🔎

Typically, there are two major components of a broker’s view:

Rating: A call to action, usually along the lines of buy, hold, or sell, but depending on the broker’s ratings system, can be somewhere in between (e.g., accumulate or add is typically between a hold and a buy).

Price target (PT): The price at which the broker expects the stock will be trading at some point in the future, generally within the next 12 months.

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Broker upgrades since Wednesday 24 July

Biggest broker rating upgrades since Wednesday 24 July. Price Target Upside/Downside (“PT Upside%”) values in the last column are based on closing prices on Tuesday 23 July.

From the brokers:

Citi upgraded Pilbara Minerals (ASX: PLS) to NEUTRAL from SELL

• "Lithium fundamentals remain tough with Citi expecting prices to trend lower into year end."

• "Positives: PLS is the best in class operationally, has a cash buffer which we expect to hold above $1.2bn on spot, a growth story and a project that should generate cash through cycle (3-4% FCF spot)."

• "While it’s definitely too soon to get positive on the sector, we move to Neutral from Sell"

• "Compared to 6m ago, we don’t think consensus SC pricing into next FY is too far off the money."

• The price target was lowered to $2.90 from $3.20.

UBS upgraded Technology One (ASX: TNE) to BUY from NEUTRAL

• "Customer feedback in key demographics has been positive, giving us confidence around the sustainability of TNE's 115-120% pa NRR target."

• "TNE carries a relatively rich multiple but not inconsistent with ASX tech/ software stocks on a growth-adjusted basis. We do not necessarily expect multiple expansion, but see a company growing profits at near-20% pa to deliver attractive shareholder returns."

• The price target was increased to $21.90 from $17.20

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Broker downgrades since Wednesday 24 July

Biggest broker rating downgrades since Wednesday 24 July. Price Target Upside/Downside (“PT Upside%”) values in the last column are based on closing prices on Tuesday 23 July.

From the brokers:

Morgan Stanley downgrades ANZ Group (ASX: ANZ) to UNDERWEIGHT from EQUAL-WEIGHT

• "Given ~11% downside to our PT and a weaker near-term earnings outlook than peers, we downgrade ANZ to UW."

• Price target is lowered to $26.20 from $27.80

UBS downgraded JB Hi-Fi (ASX: JBH) to SELL from NEUTRAL

• "JBH is a quality retailer with a strong balance sheet (net cash ex leases), capable management team and some company-specific tailwinds. However, post recent P/E multiple re-rating (+16% YTD to 17.5x vs the ASX200 +4% to 17.1x) & share price performance (+26% YTD vs the ASX200 +4%), arguably due to optimism regarding revenue growth acceleration in computer & telco products due to AI capability, JBH is now trading well above historical levels and average premiums to key discretionary peers."

• Price target was increased to $60 from $59

Macquarie downgraded Woolworths Group (ASX: WOW) from OUTPERFORM to NEUTRAL

• "WOW has positioned itself as the premium supermarket and, at present, given household budget pressures, value brands are winning."

• "Our key change in FY24 is in Big W, which we now forecast to be loss-making in 2H24, which has been flagged as a potential risk in the half."

• Price target was increased to $37.50 from $35

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Biggest broker price target changes since Wednesday 24 July

Biggest broker price target changes since Wednesday 24 July. Price Target Upside/Downside (“PT Upside%”) values in the last column are based on closing prices as on Tuesday 23 July.

From the brokers:

Shaw and Partners increases price target for SRG Global (ASX: SRG) to $1.30 from $1.20 (implies 41.3% upside)

• "SRG provided a trading update that included FY24 EBITDA tracking towards the top end of guidance, a very strong cash conversion result for FY24, and ongoing double-digit EBITDA growth forecast for FY25."

• "SRG’s recent results and FY25 outlook provide strong evidence that SRG is delivering on its strategy and is a lower risk investment when compared to many construction and mining service peers given the recurring nature of a large portion of its revenue (circa 70%)."

• "We additionally expect the macro-outlook to remain strong, across infrastructure, asset services, mining and select construction. SRG is trading at a discount to its ASX-listed peers despite delivering higher EBITDA growth."

• Rating retained at BUY

Morgan Stanley increases price target for GQG Partners (ASX: GQG) to $3.75 from $2.50 (implies 28.4% upside)

• "We like GQG's performance track record, organic growth trends, and global distribution pipeline. The stock has performed strongly, +73% YTD vs. ASX200 +4%, yet we have almost 30% upside to our new price target."

• "We've seen a meaningful pickup in net flows, from 7% net inflows (annualised) as a percentage of FUM in 2H23 to ~18% in 1H24 or US$11bn. GQG's funds continue to outperform their benchmarks, so we think that it can sustain material inflows."

• Rating retained at OVERWEIGHT

Bell Potter increases price target for MedAdvisor (ASX: MDR) to $0.64 from $0.49 (implies 21% upside)

• "MDR had another strong quarter of topline growth in the US and ANZ, while gross margins also improved. Q4 revenue was $22.3m (up +32% on pcp). Full-year revenue was $122.1m (+25% on pcp) and in line with pre-released guidance of $120m-123m...The highlight of the Q4 update was a strong recovery in 2H24 gross margins."

• Rating retained at BUY