2 ASX shares rated as strong buys by brokers

A few brokers have named the same two ASX shares as buys, so they could be worth looking at, including Altium Limited (ASX:ALU).

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There are two ASX shares that multiple brokers have named as a buy, so they could be worth looking at.

Brokers don’t get everything right, but it can be useful to know what they think are opportunities. Businesses that several brokers think are buys could be particularly interesting to investors:

Altium Limited (ASX: ALU)

Altium is one of the larger ASX tech shares that Aussies can invest in on the ASX. It specialises in electronic PCB software for engineers to design the products, devices and vehicles of the future.

There are currently at least four brokers that rate the Altium share price as a buy, including Morgan Stanley and Credit Suisse.

Brokers weren’t exactly impressed by the FY21 half-year result, noting the higher costs of the business and the underperformance against expectations.

Morgan Stanley also noted that Altium is now assuming that it will be able to find an acquisition, or acquisitions, that can plug the 2025 goal gap left by its weaker performance during COVID and the sale of the TASKING business.

The FY21 half-year result showed all the numbers going in the wrong direction – continuing revenue fell 4% to US$80 million, reported expenses rose 3% to US$53 million, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 15% to US$27 million and profit before tax declined 23% to US$20.7 million. Operating cashflow and the dividend also went backwards.

However, management are heavily focused on future growth with its Altium 365 product, which is a cloud collaboration platform. It could be important for winning over many more engineer customers into the future. Altium has a 100,000 subscriber goal for Altium Designer. 

According to Morgan Stanley, the Altium share price is valued at 50x FY21’s estimated earnings. Morgan Stanley has a price target of $37 on Altium.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is a retailer of jewellery. Its aim is to “bring brilliantly affordable, on-trend jewellery to the world, whilst delighting our customers with our commitment to continually improve her Lovisa experience.”

There are currently at least three brokers that like the ASX retail share, including Morgans that rates Lovisa as a buy with a price target of $17.95.

The broker believes Lovisa will benefit from ANZ retail returning to a new normal quicker than other regions. Morgans thinks that the Beeline purchase was a good one and could help grow earnings nicely after the rebranding.

Last month the company reported that its revenue was down 9.8% in the first half of FY21 and the net profit after tax (NPAT) was down 22.6% to $27.8 million.

However, the company continues to grow its store numbers and it’s also seeing high levels of growth with its online offering – sales were up 335% during the half-year period.

With the Beeline acquisition, it’s now in a number of new markets in Europe – Germany, Switzerland, Netherlands, Belgium, Austria and Luxembourg. For a cost of just €70, Lovisa bought 114 stores, of which it expects to convert 90 to Lovisas and open for trade.

According to Morgans, the Lovisa share price is valued at 38x FY22’s estimated earnings.

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Tristan Harrison owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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