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3 stocks brokers are backing as buys this week

While share market investing is something you might do in your spare time, brokers and analysts devote their lives to scouring the market for opportunities.

When they label something a buy – most of us want to know why.

Here are three under-the-radar stocks brokers have their eye on for a buy in this week.

Motorcycle Holdings Ltd (ASX: MTO)

Wilsons has retained its buy rating on speculative small cap Motorcycle Holdings Ltd this week, with a revised 12-month share price target of $3.89.

Motorcycle Holdings is Australia’s largest motorcycle dealership operator with 41 franchises across 24 locations.

Motorcycle Holdings shares closed off Friday trade at $3.30 after some share price ups and downs of late.

Recent guidance out of Motorcycle Holdings for FY18 EBITDA is in the range of $19 million to $21 million with Wilsons 12-month price target of $3.89 based on an FY19 adj EV/EBITDA of 9.5x.

While new bike sales are on the rise, Wilsons favours Motorcycle Holdings for its earnings growth potential over the long term, with the company’s recent acquisition activity holding it in good stead to leverage off new opportunities.

Wilsons is watching for the success of the roll out of Harley Davidson’s MY19 range to be released later in 2018.

Service Stream Limited (ASX: SSM)

Canaccord Genuity has placed a buy rating on network services company Service Stream Limited with a price target upgrade from $1.80 to $1.87.

Service Stream last week announced it had extended its contract with NBN Co Ltd for a further 18 months for network implementation and restoration activities.

Revenue for the contract extension until December 2019 is expected to be around $45 million with an option to extend by an additional six months thereafter.

Canaccord has upgraded its earnings assumptions for Service Stream based on the win with EPS forecasts at 13.5c per share for FY19 and 14.7c per share for FY20, but has kept its FY18 EPS forecast unchanged at 11.4c per share.

Canaccord forecast FY18 EBITDA of $64.4 million with the expectation Service Stream will report its 10th consecutive half-on-half periods of positive earnings growth in August.

Global Geoscience Limited (ASX: GSC)

Global Geoscience Limited is an exploration company with a focus on a lithium-boron project located in southern Nevada in the US, with gold, copper and silver projects in Nevada and Arizona.

Taylor Collison has a buy rating on the company this week, with Global Geoscience announcing last week it was on track to deliver the first major lithium mine in the US at its Rhyolite Ridge project.

The broker has Global Geoscience named as a speculative buy with a price target of 50c per share and the $529 million market cap company has seen a reasonable share price rise over the last 12 months – up from 14c per share at this time last year to close off last week’s trade at 36c per share.

One to watch as its US projects continue to grow.

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Motley Fool contributor Carin Pickworth 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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