The rally on the S&P/ASX 200 Index (Index:^AXJO) is picking up steam and some ASX stocks are enjoying even bigger runs as they just got upgraded by leading brokers to “buy”.
The top 200 stock benchmark jumped 1.1% to an intraday high during lunch time trade with tech stocks leading the charge.
But there’s plenty of action outside that space too.
JBH share price jumps on upgrade
Take the JB Hi-Fi Limited (ASX: JBH) share price as an example. Shares in the electronics retailer surged 3.2% to $48.25 after Macquarie Group Ltd (ASX: MQG) upgraded the stock to “outperform” as it sees upside risks to JBH’s FY21 sales and earnings.
“Redirected travel and service spend & elevated renovation activity are likely to provide a consistently higher base over FY21,” said the broker.
“Industry contacts have noted that the shift in consumer behaviour to indiscriminate buying has been prolonged, supporting higher margins.”
Christmas shopping buzz to return
What’s more, a range of new tech products is likely to reenergise the Christmas shopping season. These new tech toys include 5G handsets from the likes of Apple Inc. (NASDAQ: AAPL) and Microsoft Corporation’s (NASDAQ: MSFT) latest Xbox.
“JBH’s online offering handled the elevated demand over 2H20 better than many peers,” added Macquarie.
“Industry feedback suggests current online sales in Victoria are providing a meaningful offset to the lost sales from closed brick & mortar stores.”
The broker’s 12-month price target on the JB Hi-Fi share price is $53.70 a share.
Big discount to book value
Another outperformer is the Challenger Ltd (ASX: CGF) share price, which leapt 3% to $3.74 at the time of writing.
The annuity products company got upgraded by Credit Suisse to “outperform” from “neutral” today. The CGF share price is trading at a sharp discount to book value after tumbling around 10% since it released its disappointing profit result, but the stock is now looking too cheap.
Bargain hunters delight
“CGF is trading on 0.69x FY21E BV [book value],” said the broker.
“However, if we strip out the Funds Management business (which we apply a conservative 15x multiple to), the Life business (including allocated costs) is trading on 0.59x FY21E BV.
“This is arguably too low considering it generates an 8% ROE on this capital (0.8x might be more appropriate).”
Free kick from the government
Furthermore, the release of the government’s Retirement Income Review could give the stock another reason to rally.
Credit Suisse believes the government could provide regulatory support, in the best-case scenario. But even if the status quo is maintained, this could provide confidence to drive growth in the annuities industry.
The review findings could potentially be released in October. The broker’s 12-month price target on the stock is $4.25 a share.
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors.
Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Macquarie Group Limited. The Motley Fool Australia has recommended Apple. 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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