The ASX share market is poised to rally for its third straight day but two stocks in particularly will be closely watched after they got a broker upgrade.
The futures market is tipping a 0.3% rise in the S&P/ASX 200 Index (Index:^AXJO) this morning thanks to positive leads from Wall Street.
But the embattled Insurance Australia Group Ltd (ASX: IAG) share price is in the spotlight after JPMorgan upgraded it to "overweight" from "neutral" today.
Why the IAG share price could rebound
This could help the IAG share price rebound from yesterday's 4% sell-off due to contagion fears on the collapse of Greensill Capital.
The broker believes the big sell-off is overdone and that the fall represents a buying opportunity.
IAG issued a statement confirming it has no net insurance exposure related to Greensill entities and sold its 50% stake in the underwriting agency backing Greensill.
Less risky than thought
Several things will need to go wrong together for this to pose a risk to IAG, according to JPMorgan. This includes the collapse of Tokio Marine, which bought IAG's stake.
That's unlikely as Tokio Marine writes more than $50 billion in premiums each year. The broker thinks the fallout from Greensill is manageable for an insurer that size.
JPMorgan's 12-month price target on the IAG share price is $5 a share.
Another ASX share upgraded to "buy"
Another ASX share that got upgraded by JPMorgan today is the Qantas Airways Limited (ASX: QAN) share price.
While the Qantas share price has taken off 12% over the past month, the broker believes there is more upside for the airline.
"We are in the early stages of a recovery and believe Qantas is well positioned both from a balance sheet and competitive position to come out of the crisis stronger," said the broker.
"It has taken material costs out of the business with ~$1bn pa likely to be an ongoing savings from FY23."
COVID loser to winner
The broker is forecasting Qantas to be cash flow positive again from the June quarter. It upgraded the Qantas share price to "overweight" from "neutral" and increased its 12-month price target by 50 cents to $6 a share.
While this puts Qantas shares at a slight premium to its historical valuation, JPMorgan thinks this is justified.
The COVID-19 pandemic has knocked off competition and Qantas appears to be in a stronger competitive position.
