Bargain hunters could be getting excited during this reporting season as some S&P/ASX 200 (Index:^AXJO) (ASX:XJO) stocks have fallen out of favour on the back of their results.
The trick is knowing which are the disasters to avoid and which are the ones that have been unduly oversold.
To get a hint on where the real bargains might lie, I’ve canvassed the latest broker reports and three stocks stood out.
Flying in turbulence
The Qantas Airways Limited (ASX: QAN) share price hit an air pocket as the airline is rocked by the growing coronavirus epidemic.
The stock slumped 10% since the start of the year but UBS thinks there is no better time to buy Qantas shares.
“In response to the Coronavirus, Qantas announced that it will reduce International capacity by 4% and despite incurring lower fuel costs the net impact to profit will be $100-150m. This was potentially better than some feared,” said the broker.
“Our medium term thesis is unchanged. Rational domestic competition and growth in loyalty underpin 2/3 of Qantas’ cash flow.”
UBS reiterated its “buy” recommendation on Qantas with a 12-month price target of $7.40 a share.
Heading back to black
Miner Whitehaven Coal Ltd (ASX: WHC) is getting burnt as its results and dividend were below expectations. The Whitehaven share price plunged nearly 16% in the last two weeks.
But those who don’t mind investing in a polluting commodity might use the dip as a buying opportunity with Credit Suisse sticking to its “outperform” recommendation on the stock.
The broker doesn’t think it was all gloom and doom and the miner’s second half performance could trigger a rebound in the share price.
“Currency is favourable, thermal prices are inching up and the 2H should beat the 1H from a volume perspective, even if guidance misses slightly,” said Credit Suisse.
“Thermal coal exposure isn’t for everyone but in 12 months’ time we may be noting the 1H just gone was the most challenging in recent memory.”
Credit Suisse’s price target on Whitehaven is $3.50 a share.
Another stock that missed consensus expectations is property classifieds group Domain Holdings Australia Ltd (ASX: DHG). This could prompt brokers to cut their earnings forecasts.
But don’t let that spook you as Morgan Stanley believes Domain will reach a positive inflection point in the not-too-distant future.
“We continue to hold a positive view on DHG for its exposure to the Sydney + Melbourne residential property market recovery,” said the broker.
“DHG’s leverage to a positive R/E listings market is very high, unfortunately in 1H, this continued to work against it.”
Morgan Stanley price target on Domain is $3.60 a share.
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Motley Fool contributor Brendon Lau 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.