Broker Watch

These ASX stocks enjoyed the biggest upgrades and price target bumps this week

Wed 03 Jul 24, 12:20pm (AEST)
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Source: Shutterstock, Market Index

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Key Points

  • Paladin Energy (PDN) came into focus after it announced the takeover of a Canadian uranium developer
  • Insurance Australia Group (IAG) was lauded for its profit upgrade
  • UBS slashed the prices of several ASX lithium stocks due to lower lithium price forecasts

We’ve all heard the saying “Winners are grinners”, but is it the case that winners exclusively enjoy the biggest broker upgrades and price target bumps?

Well, yes and no. Generally, stocks that report better than expected/good news do receive rating upgrades. But! If that good news causes a stock’s price to rise to a point where a particular broker no longer sees value in it, that stock might find itself with a rating downgrade.

The opposite is also true. A stock whose price gets belted on bad news may find itself the recipient of a rating upgrade from a broker who now views it as trading at a better valuation.

Price targets, on the other hand, tend to go in the direction of the share price. So, if a stock rises in price, brokers tend to reflect that in their new price target and vice versa.

There are some great examples of the vagaries of broker ratings and price target changes in this week’s lists!

Consider sleep apnea device maker Resmed Inc (ASX: RMD). It plunged around 15% last week on news Eli Lilly had seen positive results for its obesity drugs. Fewer obese people could mean fewer customers for RMD’s products. Broker CLSA viewed the drop in RMD’s share price as a buying opportunity, upgrading its rating on the stock from OUTPERFORM to BUY.

Elsewhere, property developer Mirvac Group (ASX: MGR) issued a trading update on Friday that saw its shares dip over 6%. Broker Citi said MGR’s price now represented “limited downside”, and that it now had an “attractive” valuation. As a result, Citi upgraded its rating on MGR to BUY from NEUTRAL.

Contrasting RMD and MGR, Insurance Australia Group (ASX: IAG) provided the market with a fantastic market update that saw its shares pop over 10%. Unfortunately, that made IAG a little too rich for broker Jarden’s blood, who promptly downgraded its rating on the stock from BUY to OVERWEIGHT.

In other interesting moves detailed below, watch out for broker UBS's slashing its price targets on several major ASX lithium stocks. Lower lithium minerals price forecasts are to blame.

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!


How to read broker recommendations ๐Ÿ”Ž

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.


Broker upgrades since Wednesday 26 June

Company

Broker

New Rating

Old Rating

Price Target

PT Upside%

Bluescope Steel (BSL)

JP Morgan

Overweight

Neutral

$23.00

16.0%

Collins Foods (CKF)

UBS

Buy

Neutral

$11.50

28.8%

Karoon Energy (KAR)

Jarden

Buy

Overweight

$2.28

26.0%

Lendlease Group (LLC)

Citi

Buy

Neutral

$6.30

11.3%

Lynas Rare Earths (LYC)

CLSA

Outperform

Underperform

$6.55

6.9%

Mirvac Group (MGR)

Citi

Buy

Neutral

$2.10

12.9%

Paladin Energy (PDN)

Bell Potter

Buy

Hold

$16.10

29.9%

Power Holdings (PWH)

E&P

Positive

Neutral

$13.00

18.2%

Resmed Inc (RMD)

CLSA

Buy

Outperform

$34.40

21.4%

Super Retail Group (SUL)

UBS

Buy

Neutral

$15.00

10.7%

Universal Store Holdings (UNI)

UBS

Buy

Neutral

$6.00

21.0%

Viva Energy Group (VEA)

RBC Capital Markets

Outperform

Sector Perform

$3.75

19.0%

Biggest broker rating upgrades since Wednesday 26 June. Price Target Upside/Downside (“PT Upside%”) values in the last column are based on closing prices on Tuesday 2 July.

From the brokers:

UBS upgrades Collins Foods (ASX: CKF) to BUY from NEUTRAL

  • “A resilient result in our view, given the tough consumer environment - materially better than the market had feared”

  • “Our FY25-28E EPS reduces -16% to -17%, but we still forecast FY25-28E EBITDA growth of 6%/14%/12%/10%”

  • The price target was increased to $11.50 from $10.95

Bell Potter upgrades Paladin Energy (ASX: PDN) to BUY from HOLD

  • “[PDN shareholders] will gain exposure to one of the pre-eminent uranium assets in the Athabasca Basin for, what we can gather, is an attractive price”

  • “We argue the new PDN is bigger and better”

  • “We see this as a potential buying opportunity Irrespective of the transaction”

  • The price target was increased to $16.10 from $15.70

UBS upgrades Universal Store Holdings (ASX: UNI) to BUY from NEUTRAL

  • “Despite downside risk to consensus near-term, after becoming more constructive on the Australian consumer and given the strong medium-term earnings growth outlook, we upgrade UNI to Buy”

  • “The 1yr fwd P/E of 11x (14% disc to AX1 vs 9% avg since listing) presenting an attractive risk/reward”

  • The price target was lowered to $6.00 from $6.25.


Broker downgrades since Wednesday 26 June

Company

Broker

New Rating

Old Rating

Price Target

PT Upside%

AGL Energy (AGL)

UBS

Neutral

Buy

$10.85

1.0%

City Chic Collective (CCX)

Citi

Neutral

Buy

$0.16

33.3%

Charter Hall Group (CHC)

CLSA

Underweight

Outperform

$11.51

5.6%

DGL Group (DGL)

Bell Potter

Hold

Buy

$0.65

19.3%

Healius (HLS)

Bank of America

Underperform

Neutral

$1.30

-9.1%

Insurance Australia Group (IAG)

Jarden

Overweight

Buy

$7.35

3.1%

Macmahon Holdings (MAH)

Argonaut Securities

Hold

Buy

$0.30

9.1%

Reliance Worldwide Corp. (RWC)

Bank of America

Neutral

Buy

$4.50

2.5%

Strike Energy (STX)

Macquarie

Underperform

Neutral

$0.22

-4.3%

Biggest broker rating downgrades since Wednesday 26 June. Price Target Upside/Downside (“PT Upside%”) values in the last column are based on closing prices on Tuesday 2 July.

From the brokers:

UBS downgrades AGL Energy (ASX: AGL) to NEUTRAL from BUY

  • “We see potential upside from here balanced with downside risks arising from unplanned generation outages and the risk of higher retail costs”

  • “AGL embarks on a highly complex retail transformation from SAP to Kaluza”

  • The price target was lowered to $10.85 from $11.25

Macquarie downgrades Strike Energy (ASX: STX) to NEUTRAL from BUY

  • “We see more attractive opportunities elsewhere with stronger FCF (KAR, COE) or more probable M&A potential (COE, CVN)”

  • The price target was retained at $0.22


Biggest broker price target changes since Wednesday 26 June

Company

Broker

Rating

New PT

Old PT

PT Change%

PT Upside%

Botanix Pharmaceuticals (BOT)

Euroz Hartleys

Buy

$0.47

$0.33

42.4%

44.6%

Insurance Australia Group (IAG)

Morgan Stanley

Equal-Weight

$6.60

$5.45

21.1%

-7.4%

James Hardie Industries (JHX)

Macquarie

Outperform

$66.60

$55.00

21.1%

41.8%

Insurance Australia Group (IAG)

Citi

Buy

$8.00

$6.75

18.5%

12.2%

Super Retail Group (SUL)

UBS

Buy

$15.00

$13.00

15.4%

10.7%

Origin Energy (ORG)

UBS

Buy

$12.10

$10.55

14.7%

10.7%

Baby Bunting Group (BBN)

Citi

Neutral

$1.79

$1.59

12.6%

18.5%

Insurance Australia Group (IAG)

Goldman Sachs

Neutral

$6.72

$6.00

12.0%

-5.8%

Insurance Australia Group (IAG)

Jefferies

Hold

$7.70

$6.95

10.8%

8.0%

Xero (XRO)

Goldman Sachs

Buy

$180.00

$164.00

9.8%

34.8%

Insurance Australia Group (IAG)

UBS

Neutral

$7.10

$6.50

9.2%

-0.4%

Aristocrat Leisure (ALL)

Macquarie

Outperform

$55.00

$50.50

8.9%

10.9%

Pexa Group (PXA)

Macquarie

Outperform

$16.80

$15.45

8.7%

25.6%

Whitehaven Coal (WHC)

Morgan Stanley

Overweight

$9.75

$9.00

8.3%

13.5%

Insurance Australia Group (IAG)

Jarden

Overweight

$7.35

$6.80

8.1%

3.1%

Healius (HLS)

Macquarie

Neutral

$1.45

$1.35

7.4%

1.4%

Wisetech Global (WTC)

Goldman Sachs

Neutral

$91.00

$85.00

7.1%

-4.5%

Strike Energy (STX)

Bell Potter

Buy

$0.31

$0.29

6.9%

34.8%

Aristocrat Leisure (ALL)

Morgan Stanley

Overweight

$52.30

$49.50

5.7%

5.5%

Evolution Mining (EVN)

Goldman Sachs

Buy

$4.00

$4.25

-5.9%

16.3%

Paladin Energy (PDN)

Citi

Buy

$16.00

$17.00

-5.9%

29.1%

Immutep (IMM)

Bell Potter

Buy

$0.75

$0.80

-6.3%

158.6%

Cobram Estate Olives (CBO)

Bell Potter

Hold

$1.95

$2.10

-7.1%

15.7%

Pilbara Minerals (PLS)

UBS

Sell

$2.50

$2.70

-7.4%

-15.8%

Collins Foods (CKF)

Morgan Stanley

Overweight

$13.00

$14.20

-8.5%

45.6%

Charter Hall Long Wale Reit (CLW)

Citi

Neutral

$3.50

$3.90

-10.3%

6.7%

Reliance Worldwide Corp. (RWC)

Bank of America

Neutral

$4.50

$5.05

-10.9%

2.5%

Alkane Resources (ALK)

Bell Potter

Buy

$1.10

$1.25

-12.0%

126.8%

Healius (HLS)

Bank of America

Underperform

$1.30

$1.50

-13.3%

-9.1%

DGL Group (DGL)

Bell Potter

Hold

$0.65

$0.75

-13.3%

19.3%

Collins Foods (CKF)

Macquarie

Neutral

$10.80

$12.50

-13.6%

20.9%

Saturn Metals (STN)

Shaw and Partners

Buy

$0.37

$0.44

-15.9%

102.2%

Charter Hall Group (CHC)

CLSA

Underweight

$11.51

$13.74

-16.2%

5.6%

IGO (IGO)

UBS

Sell

$5.95

$7.35

-19.0%

5.7%

Patriot Battery Metals Inc. (PMT)

UBS

Buy

$1.00

$1.30

-23.1%

86.9%

Liontown Resources (LTR)

UBS

Neutral

$1.00

$1.40

-28.6%

4.7%

Cettire (CTT)

Bell Potter

Buy

$2.60

$4.00

-35.0%

114.0%

KMD Brands (KMD)

Morgan Stanley

Equal-Weight

$0.35

$0.55

-36.4%

4.5%

City Chic Collective (CCX)

Citi

Neutral

$0.16

$0.63

-74.6%

33.3%

Biggest broker price target changes since Wednesday 26 June. Price Target Upside/Downside (“PT Upside%”) values in the last column are based on closing prices as on Tuesday 2 July.

From the brokers:

Morgan Stanley increases price target on IAG Group (ASX: IAG) to $6.60 from $5.45 (+21%)

  • “Valuation is full – FY25E P/E of approximately 18x is a historical high”

  • “Managing volumes vs. margins also remain a concern”

  • Rating is retained at EQUAL-WEIGHT

Macquarie increases price target on James Hardie Industries (ASX: JHX) to $66.60 from $55.00 (+21%)

  • “We were impressed again by the quality of people, the propositional positioning and the operational leverage to a recovering market”

  • “We think the stock offers value after the recent correction. While macro conditions are a risk, JHX is positioned for recovery”

  • Rating is maintained at OUTPERFORM

UBS lowers price target on Pilbara Minerals (ASX: PLS) to $2.50 from $2.70 (-7.4%), on IGO (ASX: IGO) to $5.95 from $7.35 (-19%), on Patriot Battery Metals (ASX: PMT) to $1.00 from $1.30 (-23%), and on Liontown Resources (ASX: LTR) to $1.00 from $1.40 (-28%)

  • “We update our [lithium minerals] supply-demand model while taking prices lower 6-10% across the curve (for spodumene)”

  • “With increased uncertainty on the long-term demand outlook ex-China and continued opaqueness on near-term supply additions from China/Africa, we remain underweight the sector”

  • Rating is maintained at: PLS-SELL, IGO-SELL, PMT-BUY, LTR-NEUTRAL

 

Written By

Carl Capolingua

Content Editor

Carl has over 30-years investing experience, helping investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.

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