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The Medibank (ASX:MPL) share price rockets on broker upgrade


The Medibank Private Ltd (ASX: MPL) share price jumped to a near two-month high this morning after a broker upgraded the stock. But it isn’t the only ASX stock that got up upgraded to “buy”.

Shares in the private health insurer leapt 4.9% to $2.78 at the time of writing. This makes it the third best performer on the S&P/ASX 200 Index (Index:^AXJO) after the Unibail-Rodamco-Westfield CDI (ASX: URW) share price and GUD Holdings Limited (ASX: GUD) share price.

Medibank share price upgraded on healthy outlook

The strong showing by Medibank follows a period of underperformance. Morgan Stanley reckons this is an opportune time to buy a bargain and upped its rating to “overweight” from “equal-weight”.

“MPL performed well to grow policy holders 0.6% in FY20 amid the pandemic,” said the broker.

“This may provide confidence that MPL’s target for at least 1% growth in FY21 is achievable (we estimate retaining 100% of suspended policies in an overall flat system is sufficient to meet that target).”

Margin expansion opportunity

Further, an expected premium increase will further bolster earnings in 2021. Like other insurers, Medibank deferred the scheduled 3.27% rate increase to policies due to COVID‐19 by six months. Morgan Stanley believes management will add a further 2% increase by April next year.

It’s also worth noting the recent update by hospital operator Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC). It suggested a benign claims environment.

Morgan Stanley increased its price target on Medicare to $3.10 from $2.70 a share.

Sweet sounding upgrade for Audinate share price

Another stock that enjoyed a broker upgrade is the Audinate Group Ltd (ASX: AD8) share price.

Credit Suisse lifted its recommendation on the audio networking solutions group to “outperform” from “neutral” as it believes sales are about to accelerate.

“Monthly sales have been steadily improving sequentially, with the worst of the COVID-19 impact appearing to have passed,” said the broker.

“We continue to look favourably on the long-term opportunity for the business, with Dante increasingly appearing to be the de-facto networked audio standard.”

Benefitting from COVID structural change

There is another reason to feel bullish towards the Audinate share price. Structural changes pushing more people to work from home as a result of the pandemic is a positive for the group.

“Corporate (not live events) is the biggest end market for pro AV,” said Credit Suisse.

“We believe flexible/remote working and reduced business travel are accelerating structural growth in corporate audio/video requirements.”

The broker upgraded its 12-month price target on Audinate to $8 from $5.30 a share.

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Returns As of 6th October 2020

Brendon Lau owns shares of AUDINATEGL FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia has recommended AUDINATEGL 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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