Brokers upgrade outlooks for Medibank Private Ltd and Aristocrat Leisure Limited 

Medibank Private Ltd (ASX:MPL) and Aristocrat Leisure Limited (ASX:ALL) shares are rebounding.

| More on:

Credit: Francisco Osorio

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Market sentiment can play a huge role in the performance of a particular share at times. It can carry a share to new heights or it can drag it to new lows.

Two shares which have recently experienced a shift in sentiment are Medibank Private Ltd (ASX: MPL) and Aristocrat Leisure Limited (ASX: ALL), which on Friday 29 January were both upgraded to a consensus buy according to the brokerage arm of Commonwealth Bank of Australia (ASX: CBA), CommSec.

Medibank Private Ltd

Medibank is going through a good run of upgrades. Earlier this month both Macquarie Securities and Bell Potter upgraded their price targets to $2.72 and $2.97, respectively. This means potential upside of 8.3% to 18.3% from Friday’s close price of $2.51.

The enthusiasm appears to stem from when the company recently announced that due to improved hospital contracting, improved claim outcomes, and a slowdown in hospital utilisation growth, there would be a profit upgrade for the first half of 2016.

Although revenue is expected to grow slightly slower than expected, management believes that through operational improvements it will report operating profit of $470 million. This is well beyond the prior guidance given by management of $370 million. This is a vast improvement by the company and could be the catalyst to some great share price gains.

Aristocrat Leisure Limited

I have spoken recently about Aristocrat Leisure, so was pleased to see the shares get upgraded. The weak Australian dollar has been, and will continue to be, a huge tailwind for the company due to its large exposure to the United States market.

Many market commentators are expecting there to be at least two rate rises in the US this year which should cause the Australian dollar to decline further. In the most recent economic weekly report by Westpac Banking Corp (ASX: WBC), the bank has forecast the Australian dollar to trade at 66 U.S. cents by June. The company’s top and bottom lines will undoubtedly see a big boost should this occur.

Currently the shares trade at a PEG ratio of 0.98 and, although it has a reasonably high debt to equity ratio, the company exhibits strong levels of liquidity and free cash flow generation. I believe the company is well positioned to grow its earnings and provide share price gains for shareholders.

Foolish takeaway

Medibank Private and Aristocrat Leisure are two blue-chip shares which the market is looking favourably on at present. A further positive I believe is that the excellent long-term prospects that both companies exhibit should help provide shareholders with long-term gains long after this recommendation upgrade wears off.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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 Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »