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:
IDP Education Ltd (ASX: IEL)
According to a note out of Goldman Sachs, its analysts have retained their buy rating but cut the price target on this student placement and language testing company's shares to $19.40. The broker is pleased with IDP Education's liquidity following its capital raising and believes it has enough funds to last over 12 months should it be required. Though, Goldman appears optimistic that this won't be necessary. And while it has cut its earnings forecasts materially in FY 2020 and FY 2021, the broker expects IDP Education to bounce back strongly in FY 2022. In light of this and its solid long term prospects, it believes its shares are a buy. I think Goldman Sachs is spot on, though it will most probably be a very bumpy 12 months or so.
Telstra Corporation Ltd (ASX: TLS)
Analysts at UBS have retained their buy rating and $3.70 price target on this telco giant's shares. According to the note, the broker expects Telstra to cut its annual dividend down to 14 cents per share. This could be as soon as the second half of FY 2020, it warns. Based on this dividend estimate, Telstra's shares offer a fully franked 4.4% dividend yield. Despite the cut, the broker still believes that Telstra's shares are in the buy zone and has reiterated its positive rating. I agree with UBS on Telstra, though I'm optimistic that its free cash flow will be sufficient for it to maintain its dividend.
Wesfarmers Ltd (ASX: WES)
A note out of the Macquarie equities desk reveals that its analysts have retained their outperform rating and $40.20 price target. According to the note, with its cash balance overflowing following the sell down of its stake in Coles Group Ltd (ASX: COL), Macquarie believes the conglomerate is well-placed to take advantage of recent asset devaluations. As such, the broker has named 38 companies it feels Wesfarmers could be interested in acquiring. In addition to this, the broker notes that demand for hardware products has been strong. It feels this bodes well for its Bunnings business. I agree with Macquarie and would be a buyer of Wesfarmers' shares.
