Leading brokers just upgraded two ASX stocks to their buy list even as we enter what could be the most trying week since COVID‐19.
The US presidential election and the shutdown of major economies due to the resurgence of COVID cases are adding to the jitters.
The S&P/ASX 200 Index (Index:^AXJO) is holding up reasonably well today considering, although that could quickly change.
ResMed share price reawakens
But this wasn't enough to keep brokers from upgrading the Resmed CDI (ASX: RMD) share price. Credit Suisse upgraded the stock to "outperform" from "neutral" following the latest quarterly results from the sleep treatment device maker.
"We believe RMD is uniquely placed to benefit from a behavioural shift to home healthcare post COVID due to its increased investment in its out‐of‐hospital platforms over the past ~5 years," said the broker.
"On an underlying basis, we estimate CPAP device sales declined 2% in 1Q21 (vs CSe ‐10%), indicating a strong recovery post lock‐downs."
Even if the UK and parts of Europe goes back into a lockdown, management indicated sales of its CPAP devices should continue to improve.
Credit Suisse's 12-month price target on ResMed is $31 a share.
RMD results ahead of consensus
Another broker that upgraded the ResMed share price is UBS, which lifted its rating on the stock to "buy" from "neutral".
"RMD 1Q21 result was well ahead of our (and consensus) forecasts, with group revenue +6% ahead of UBSe (equating to ~US$45mn)," said UBS.
"Pleasingly, sleep-related sales (flow gens and masks) recovered faster than anticipated."
UBS's 12-month price target on RMD's US-listed stock is US$210 a share.
Broker upgrade could rev SGF share price
Meanwhile, the SG Fleet Group Ltd (ASX: SGF) share price also found favour with Morgan Stanley.
The broker upgraded its recommendation on the novated leasing and fleet management group to "overweight" from "equal-weight". It believes management's 1HFY21 guidance is too conservative.
"A$22-24m NPAT guidance implies earnings are almost back to pre-Covid-19 levels and does not include drivers outside of SGF's control, particularly as Victoria comes out of lockdown," said the broker.
"SGF has described Victorian novated exposure as 'significant' so easing of restrictions likely a tailwind."
The positive updates from Eagers Automotive Ltd (ASX: APE), Bapcor Ltd (ASX: BAP) and McMillan Shakespeare Limited (ASX: MMS) also indicate that the auto industry has turned a corner.
Morgan Stanley's 12-month price target on the SG Fleet share price is $2.30 a share.
