*Please note that there were no upgrades or downgrades from Monday due to a public holiday
In the good books
Evolution Mining (EVN) was upgraded to Buy from Neutral by UBS
After a recent site visit at Evolution Mining’s Canadian Red Lake operation, UBS expects FY23 will remain a reset year given the time and investment needed to unlock the strong value presented in the mine. Four takeaways: Optimisation is complicated; the turnaround continues; the gold endowment is very strong (UBS expects the longer-term outlook for the gold price should improve); and FY23 guidance is conservative. Separately, UBS lowers short term price forecasts for base metals and bulks. Changing supply and demand dynamics result in higher forecasts for lithium prices and higher longer-term price estimates for coal, aluminium, zinc and lead. The broker points out prices for most commodities are still above cost support levels and do not yet fully ‘price in’ a recession. UBS is positive on the gold sector following recent underperformance.
Flight Centre Travel (FLT) was upgraded to Hold from Sell by Ord Minnett
With Flight Centre Travel’s share price declining -34% since May, Ord Minnett considers the stock to now represent fairer value and has upgraded its rating. The broker expects the decline to be driven by concern over slowing global growth on the company’s Corporate and Leisure divisions, and the previously inflated valuation. Ord Minnett finds business travel demand to remain solid, and expects leisure demand will hold up relatively well depending on the extent of the ongoing economic squeeze.
Transurban Group (TCL) was upgraded to Neutral from Underperform by Credit Suisse
The latest traffic data for road networks both public and tolled in Melbourne, Sydney and Brisbane proved in line with the high levels in the calendar year to date and far above the covid-restricted levels during 2021, Credit Suisse reports. The broker forecasts FY23 Sydney traffic in line with pre-covid highs, Melbourne at -3% below and Brisbane 2% above. Taking into account a weaker Aussie dollar, and a higher cost of capital, Credit Suisse cuts its target to $12.90 from $13.00 but upgrades to Neutral from Underperform.
In the not-so-good books
Ampol (ALD) was downgraded to Equal-weight from Overweight by Morgan Stanley
Morgan Stanley lowers target prices across its coverage of the Australian Energy sector after updating for energy prices and deal flow. While global energy demand has moderated with the economic outlook, the broker still favours exploration and production stocks with leverage to energy prices and strong balance sheets. Regarding Ampol, Morgan Stanley feels refining margins may have peaked and is incrementally cautious on consumer sentiment. As a result, the rating falls to Equal-weight from Overweight. The target falls to $31.23 from $39.00 after the analyst updates forecasts for 1H results. Industry view is Attractive.
Pilbara Minerals (PLS) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett lowers its target prices for stocks under its Mining sector coverage, after undertaking a mark-to-market review of September-quarter commodity prices. Given the odds of a global recession continue to increase, the broker feels risks for mining stocks are skewed to the downside. Ord Minnett continues to see strong price support for lithium on a multi-year view due to supply shortages and prefers producers over developers. After recent share price gains, the broker lowers the rating for Pilbara Minerals to Hold from Buy and leaves the $4.10 target unchanged, (an exception to the trend for Ord Minnett’s Mining sector coverage). Allkem is the preferred exposure for lithium.
Sims (SGM) was downgraded to Hold from Buy by Ord Minnett
Ord Minnett lowers its target prices for stocks under its Mining sector coverage, after undertaking a mark-to-market review of September-quarter commodity prices. Given the odds of a global recession continue to increase, the broker feels risks for mining stocks are skewed to the downside. Among non-mining steel producers BlueScope Steel is preferred over Sims, which Ord Minnett downgrades to Hold from Buy. Both stocks lack a near-term catalyst and are considered more value plays.
Viva Energy (VEA) was downgraded to Equal-weight from Overweight by Morgan Stanley
Morgan Stanley lowers target prices across its coverage of the Australian Energy sector after updating for energy prices and deal flow. While global energy demand has moderated with the economic outlook, the broker still favours exploration and production stocks with leverage to energy prices and strong balance sheets. Regarding Viva Energy, Morgan Stanley feels refining margins may have peaked and is incrementally cautious on consumer sentiment. As a result, the rating falls to Equal-weight from Overweight.
The above was compiled from reports on FNArena. The FNArena database tabulates the views of seven major Australian and international stockbrokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS. Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.