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Broker upgrade sends Virtus Health share price 5% higher

The Virtus Health Ltd (ASX: VRT) share price was one of the best performers on the All Ordinaries index on Monday.

The fertility treatment company’s shares finished the day almost 5% higher at $5.15.

Why did the Virtus Health share price charge higher?

With no news out of the company, yesterday’s strong gain appears to have been driven by a positive broker note released on Friday by UBS.

According to the note, the broker has upgraded Virtus Health’s shares to a buy rating from neutral and increased the price target on them materially from $4.40 to $5.40.

Even after yesterday’s solid gain, this price target implies potential upside of ~5% excluding dividends over the next 12 months.

Why does UBS like Virtus Health?

The note reveals that UBS has been looking at Australian IVF data and believes volume trends are looking favourable for the company.

This is a big positive for Virtus Health as the broker sees the domestic market as the key driver of its growth. In light of this, it has upgraded its earnings estimates through to FY 2021 and its price target accordingly.

Also on the move on Monday was the Monash IVF Group Ltd (ASX: MVF) share price. Its shares rose 1% to hit a 52-week high of $1.52 thanks to the aforementioned improvements in the local IVF market.

However, brokers are less bullish on this IVF provider. According to a note out of Morgans last month, its analysts have downgraded the company’s shares to a hold rating from add with an improved price target of $1.37. This price target implies potential downside of ~10% for its shares over the next 12 months.

Its analysts made the move on valuation grounds after a strong share price rise in 2019. Monash IVF’s shares are up over 50% since the turn of the year.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Virtus Health Limited. 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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