Optimism about the upcoming federal budget and interest rate cut is pushing the S&P/ASX 200 Index (Index:^AXJO) higher. But three ASX stocks are getting a further boost from broker upgrades today.
The budget and rate cut are expected to stimulate our COVID-19 stricken economy. These are enough to offset the global risks from a second COVD outbreak and upcoming divisive US election – at least for today.
From trash to treasure
But shareholders in Cleanaway Waste Management Ltd (ASX: CWY) have an extra reason to smile. The CWY share price jumped 1.7% to $2.21 this morning after Credit Suisse upgraded the stock to “outperform” from “neutral”.
The bullish change of heart follows a circa 16% slide in the Cleanaway share price that was triggered by bullying allegations levelled against its chief executive Vik Bansal.
It also didn’t help that Bansal sold more than 70% of his shares in Cleanaway for the first time after five years at the helm.
“The shares are mostly down on fears that the CEO resigns or that the Board is pressured to demand his resignation,” said the broker. “We think neither of these is likely.”
Bansal is highly regarded as the group’s net profit surged by around 300% during his reign. But Credit Suisse thinks the board’s action and the contrition expressed by Bansal means this risk is overplayed.
The broker’s 12-month price target on Cleanaway is $2.45 a share.
Building to a buy
Meanwhile, the Boral Limited (ASX: BLD) share price jumped 1.1% to $4.59 at the time of writing after Citigroup upped its rating to “buy” from “neutral”.
Earnings for the building materials supplier may be at a trough, the broker believes construction markets are rebounding.
“While the path to recovery is mixed, we estimate a ‘mid-cycle’ EBITDA of $956 million (pre AASB-16), and a return to midcycle levels would imply a ~35% rebound from FY20 levels,” said the broker.
“A new management team and upcoming portfolio review in October, could present a catalyst to drive further multiple re-rating from current levels.”
There could be further potential upside from the sale of Boral’s landbank, which could be worth up to $1.23 per share.
Another upside is corporate interest with Seven Group Holdings Ltd (ASX: SVW) buying a close to 20% stake in Boral.
Citi’s price target on the stock $5.30 a share.
Don’t cry over spilled milk
Finally, an upgrade of the A2 Milk Company Ltd (ASX: A2M) share price hasn’t yet helped the infant formula company. The A2M share price tanked another 4% today to $14.59, but Morgans thinks this is a good time to buy the stock.
“While A2M’s trading update was weaker than expected, it shouldn’t come as a big surprise given recent updates from peers,” said Morgans.
“Importantly, A2M believes the issues impacting its business are temporary and is confident strong growth will resume in the 2H21.”
If management is right, earnings could return to double-digit growth by then too.
Morgans lifted its recommendation on the stock to “add” from “hold” with a 12-month price target of $18.14 a share.
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Motley Fool contributor Brendon Lau owns shares of Seven Group Holdings Limited. The Motley Fool Australia owns shares of A2 Milk. 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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