The market is pushing further into record territory this morning and those bitten by the FOMO buy will be pleased to know that there are at least two ASX shares that brokers just added to their “buy” list.
Investors are waiting for more positive cues before pushing the index higher. This pause could be a good time to look at ASX newbie – the Peter Warren Automotive Holdings Ltd (ASX: PWR) share price.
The ASX share that’s the newest buy idea
The auto dealer only debuted on the bourse last month, and what a great time to enter the market!
You only need to look at its peers to see why. The Eagers Automotive Ltd (ASX: APE) share price and Autosports Group Ltd (ASX: ASG) share price have revved up recently. Lack of supply and strong demand for vehicles have created near-perfect conditions for the sector.
Morgan Stanley initiated coverage on the Peter Warren share price with an “overweight” recommendation.
While the sun won’t always be shining this brightly on the industry, the broker reckons the shares are cheap even on more normal profit margins.
Tailing a bigger rival to growth
What’s more, Morgan Stanley thinks Peter Warren will follow in the footsteps of the Eagers Automotive share price.
“We think the M&A opportunity resembles that of APE – which scaled from A$40m PBT in 2010, to A$120m+ five years later, through organic, inorganic and synergy execution,” said the broker.
“We can envision a similar bull case for PWR.”
Morgan Stanley’s 12-month price target on the Peter Warren share price is $4.40 a share.
Temp headwinds prompts buy upgrade for this ASX share
Meanwhile, the Costa Group Holdings Ltd (ASX: CGC) share price is the newest buy idea from Credit Suisse.
The broker upgraded the fruit and vegetable grower to “outperform” from “neutral” after management’s sour outlook.
But the factors that have contributed to Costa Group missing market expectations are seasonal and not structural, in Credit Suisse’s view.
It’s all in the margins
“Here in, lies the crux of valuing CGC. It is difficult to ascertain what might be a normal margin for CGC’s domestic product. A normal year is likely to have some agricultural impacts,” said the broker.
“In a 12-month period, CGC hit peak margins of about 14%-15%. In a bad year, CGC had margins as low as 5%-6%.
“When agriculture conditions are favourable we are swayed to think normal margins are 11%-12%. When conditions become challenging we are inclined to use more conservative margins of 10%-11%.”
These assumptions prompted the broker to upgrade the stock. Credit Suisse’s 12-month price target on the Costa Group share price is $4.15 a share.