The market may be giving ground this morning but two ASX shares are bucking the downtrend after getting upgraded to “buy” by top brokers.
The S&P/ASX 200 Index (Index:^AXJO) slipped 0.4% at the time of writing as weak leads from Wall Street weighed on sentiment.
But the pessimism isn’t extending to the Telstra Corporation Ltd (ASX: TLS) share price as it was one of two ASX shares to find favour with brokers today.
Upgraded to “buy” on mobile strength
The Telstra share price gained 0.5% to $3.14 after JPMorgan called it the best placed to benefit from mobile subscriber trends.
Mobile is the most important growth driver for the Telstra share price and TPG Telecom Ltd (ASX: TPG) share price. Telcos can’t make much from fixed broadband as the NBN has a stranglehold on that market.
“Our in-depth assessment of the market suggests that both Telstra and TPG’s Vodafone will lose share of the prepaid market to [Mobile Virtual Network Operators],” said JPMorgan.
“However, in the more lucrative postpaid market, we believe Telstra is better placed given its head start in the rollout of 5G infrastructure.”
Telstra share price catalysts
Better than expected growth in its mobile subscriber base is one potential share price catalyst for Telstra. The other is cost savings in fixed broadband.
“Additionally, we are currently at the bottom of Telstra’s medium-term EBITDA target of A$7.5-$8.5 billion by FY2023,” added JPMorgan.
“This implies potential upside to our valuation should management achieve cost reduction targets in Fixed Broadband.”
The broker upgraded its recommendation on the Telstra share price to “overweight” from “neutral”. Its 12-month price target is $4.05 a share.
Recovery play underpins “buy” upgrade for this ASX share
Another ASX share that is outperforming today is the Clover Corporation Limited (ASX: CLV) share price.
Shares in the nutrition technology company jumped 1% to $1.51 at the time of writing. UBS reckons there’s another 30% plus upside when it upgraded the Clover share price to “buy” from “neutral”.
The broker believes it’s a good recovery play as Clover’s sales were heavily impacted by the COVID-19 disruption.
Boost from Chinese regulators
Clover’s technology is used to increase the Docosahexaenoic acid (DHA) in infant formula. While the sales recovery might not be “V-shaped” given the sombre outlook by A2 Milk Company Ltd (ASX: A2M), Clover is likely to get a regulatory boost from China.
“A key result positive was CLV’s expectation for China to mandate increased DHA requirements for infant formula during 2H21E, with a 2-year introductory period,” said UBS.
“The company expects a revenue benefit from new customer wins from FY23E.”
UBS’ 12-month price target on the Clover share price is $2 a share.