Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.
Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these S&P/ASX 200 Index (ASX: XJO) shares are in the buy zone:
Aristocrat Leisure Limited (ASX: ALL)
According to a note out of Goldman Sachs, its analysts have upgraded this gaming technology company’s shares to a buy rating with a $29.00 price target. Although it sees significant near-term earnings uncertainty in its land-based businesses from global casino closures, it believes the selloff of its shares has been severely overdone. Especially given how the company’s Digital business could benefit greatly from global shutdowns. I agree with Goldman Sachs and feel Aristocrat Leisure would be a great long-term option for investors.
Challenger Ltd (ASX: CGF)
A note out of Citi reveals that its analysts have upgraded this annuities company’s shares to a buy rating with a $5.45 price target. According to the note, the broker feels that the risks to Challenger’s balance sheet have been reduced materially thanks to the repositioning of its asset portfolio. Citi also notes that Challenger has reiterated its normalised net profit before tax guidance of $500 million to $550 million for FY 2020. Whilst I think Citi makes some good points and Challenger’s shares look decent value, I intend to stay away. I’m concerned that FY 2021 could be a very difficult year for the company.
Megaport Ltd (ASX: MP1)
Analysts at Morgans have retained their add rating and $12.94 price target on this elasticity connectivity and network services company’s shares. According to the note, the broker believes Megaport could benefit during the coronavirus outbreak due to increasing data consumption and remote working. Another positive is the strength of its balance sheet following a $62 million placement in December. Morgans notes that a good portion of its cash is held in U.S. dollars. I agree with Morgans on Megaport and believe it could be a great long term investment.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended MEGAPORT FPO. 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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