From buy now pay later (BNPL) to insurance, here are the ASX 200 shares that brokers think could outperform the market.
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ASX 200 shares rated as a buy
1. Afterpay Ltd (ASX: APT)
Morgan Stanley highlights the continued momentum in Afterpay's US app downloads, with approximately 760,000 in March and exceeding December 2020 levels. Perhaps more importantly, the broker notes that US BNPL peers did not experience such an increase.
The broker also notes Afterpay's recent global partnership with Adyen, a Dutch payments company offering merchants online services. Furthermore, the broker highlighted the company's expansion into the travel vertical in Australasia with its Play Travel brand. The product works exactly like any other Afterpay product, allowing customers to choose a holiday package or build their own up to $3,000 and pay in four fortnightly instalments.
Morgan Stanley retained its overweight rating with a $149 target price. Afterpay shares are slightly weaker today, down 0.16% to $127.65.
2. AUB Group Ltd (ASX: AUB)
AUB is Australia and New Zealand's largest equity-based insurance network. A number of insurance shares were upgraded last month. This was on the basis that the insurance market is moving through a hard cycle where premiums increase and the capacity for most types of insurance decreases. Therefore, the general broker census is that an uplift in premiums will translate to improved margins over the short to medium term.
Macquarie notes that third quarter premiums increased by 4%. It highlighted that property class rates continued while the moderation in commercial motor premiums have reverted. The broker's commentary believes that higher premiums are needed to support underwriting profitability in today's lower interest rate environment.
An outperform rating was retained with a $20.40 target price. AUB shares have also surged into record territory, up almost 20% year-to-date and currently trading at $19.20.
3. Aurizon Holdings Ltd (ASX: AZJ)
A core component of Aurizon's business is its management of the Central Queensland Coal Network. Macquarie observed weaker coal volumes in the March quarter, reflecting the wet weather in NSW.
Despite the limited growth in the coal sector, Macquarie believes there is an incremental opportunity in freight. The broker highlights the re-tender by CBH, Australia's largest exporter of grain, for grade haulage in Western Australia as a key opportunity.
Macquarie has an outperform rating on Aurizon shares with a $4.40 target price. Unlike most ASX 200 shares that have managed to come back to pre-COVID highs, the Aurizon share has drifted some 30% lower in the past 12 months. Its shares are currently sitting at a 5-year low of $3.91.
4. Steadfast Group Ltd (ASX: SDF)
Macquarie's opinion of Steadfast follows a similar narrative as AUB where premium rate rises continue to be supportive. It highlights the increases in property class rates and the reversion of commercial motor rates.
The broker retained an outperform rating with a target price of $4.40. Steadfast shares currently sit around all-time record highs. However, they are relatively flat in terms of year-to-date returns. Its shares are currently fetching $4.11.
