Brokers across Australia have been busy adjusting their discounted cash flow models and recommendations again this week.
This has led to a number of shares being given buy ratings. Three which caught my eye are summarised below:
Afterpay Touch Group Ltd (ASX: APT)
According to a note out of Goldman Sachs, it has retained its conviction buy rating but reduced the price target on Afterpay Touch's shares slightly to $26.15 after looking deep into the unit economics of its Australian business. Goldman has broken down its user base into three cohorts: Prime, Late Payers, and Subprime. While the Prime cohort is the most valuable, the Late Payers cohort is also seen as valuable as it subsidises Subprime users. In respect to the latter, the broker believes the market should see bad debts resulting from Subprime users as one-time customer acquisition costs. I agree with Goldman on this and feel Afterpay Touch's shares are a buy for patient investors with a long term view. However, they are certainly a high-risk option at these levels.
Kathmandu Holdings Ltd (ASX: KMD)
A note out of the Macquarie equities desk reveals that its analysts have retained their outperform rating and lifted the price target on this retailer's shares to $3.13 following the release of its full year results yesterday. The broker was pleased with the company's sales growth and improvements in its margins. I thought that Kathmandu's result was strong and agree with Macquarie that its shares are in the buy zone right now.
TPG Telecom Ltd (ASX: TPM)
Analysts at Morgans have retained their add rating and $10.70 price target on this telco company's shares after it released a full year result in line with expectations. The broker did appear to be a little disappointed that there were no further details released in relation to the Vodafone merger, but it has held firm with its rating on the belief that the merger will generate significant synergies. While I agree that the merger is likely to generate meaningful synergies, I wouldn't be a buyer until these have been announced. In fact, at these lofty levels I would more likely be a seller of its shares than a buyer.
