Skip to main content

Morning Bell 27 August

Jessica Amir
August 27, 2020

The Aussie share market is eyeing a 0.3% lift today at the open, which will rub out some of yesterday’s 0.7% fall.

Last night U.S. manufacturing goods orders rose 11.2% in July, recovering from the sharp fall in March and April. Sentiment also got a kick as COVID-19 vaccine hopes were lifted when Moderna posted promising results from a small trial of patients.

What to watch today:

  • Afterpay (ASX:APT) just reported full financial year results. Earnings (EBITDA) came in at $44.4 million in the year, stronger than its own expectations of $43 million. APT’s price could jump to about $94 at the open today with brokers expected to upgrade their target prices given its expansion into Europe and the U.S., Morgan Stanley’s the most bullish at $101.

Local trading ideas:

  • MTS shares formed a pattern that indicates it may rise from yesterday’s close of $2.99 to $3.26 – $3.32 over the next 9 days, according to standard principles of technical analysis. Metcash’s results showed strong sales momentum and Citi expects this to continue, which is why MTS is a Citi buy with a $3.50 price target.
  • Jewellery business Lovisa Holdings (ASX:LOV), was upgraded by Bell Potter with the broker bumping up its price target to $8.35, implying 14% growth from yesterday’s close of $7.30. With trading, building and revenue growing despite the pandemic, it looks like the business is gaining momentum as expected.
  • Car dealership business A.P. Eagers Automotive (ASX:APE), was downgraded from a buy to a hold by Bell Potter with the broker increasing its price target to $9.50, indicating its share price will only rise 6% from yesterday’s close of $8.96.
Read Transcript

Good morning, thanks for your company this Thursday the 27th of August.

I’m Jessica Amir, a market analyst with Bell Direct.

While the Aussie share market is eyeing a positive day of trade, earlier the futures were up about 0.3%, indeed possibly suggesting that we could rub out some of yesterday’s drop of 0.7%.

But there’s a lot to go through today.

Financial results are out for quite a lot of top 200 companies including Woolworths (ASX:WOW), Bega Cheese (ASX:BGA), Ramsay (ASX:RHC) and Afterpay (ASX:APT).

I’ll touch in Afterpay in just a sec.

But first turning to the U.S., if they were looking for a sign that their economy is rebounding they could have got it last night.

Another economic read coming in much better than expected, this time from U.S. manufacturing goods orders, they rose 11.2% in July.

Wiping out their falls from March and April.

Sentiment also got a kick overnight on COVID-19 vaccine hopes as Moderna posted promising results from a small trial of patients.

On the corporate side of things, Salesforce shares rose 26% after reporting much stronger earnings than expected.

We saw other tech stocks follow like Facebook up 8.2% and Netflix up about 12%.

All in all, the S&P500 ended 1% higher hitting its fourth straight closing high with momentum stocks really outperforming the market.

The NASDAQ up the most out of the indices at 1.7%, setting another record high, it’s almost 40th record high this year in fact.

The Dow Jones not rallying as hard, it’s up 0.3% overnight and now it’s about 4% off its pre-COVID levels.

We saw gold rally slightly overnight up 0.4% to US$1,948 while the oil price held steady near five-month highs at US$43.43 with U.S. producers continuing to shut off output or keeping it closed bracing for a hurricane in the Gulf of Mexico.

Well touching on Afterpay, they just handed down full financial year results earnings (EBITDA) came in at $44.4 million in the year, stronger than its own expectations of about $43 million.

APT’s growth momentum indeed continued across all markets in the FY20 financial year, seeing global sales rise over 110% to $11.1 billion, that means Afterpay is now generating $15 billion per annum in sales, now this is based on fourth quarter trading.

Afterpay’s loss in other good news decreased as expected.

But what was disappointing to me was that I didn’t see any mention of Asia growth or China, any detail of what’s going to happen with the Tencent collaboration.

But today’s result all in all very positive, the price action suggests Afterpay could jump to about $94 at the open.

Expect brokers to upgrade Afterpay’s price targets given they’re expanding into Europe and the U.S., Morgan Stanley so far the most bullish $101 price target for Afterpay.

Now for trading ideas, Metcash (ASX:MTS), the owner of IGA and other businesses, they look like their shares could see a bit of a rally following a bullish signal formed using technical analysis principles found by Trading Central.

Now MTS’ shares have formed a pattern that indicates it could it could rise from yesterday’s close of $2.99 up to $3.26 – $3.32 over the next 9 trading days and that’s according to standard technical analysis principles.

Also important to know that Metcash results are showing strong sales momentum and you expect this to continue.

Citi expects this to continue as well which is why MTS is still a Citi buy with a $3.50 target.

Jewellery business Lovisa (ASX:LOV) was upgraded by Bell Potter overnight with the broker bumping up its price target to $8.35, that implies Lovisa’s shares will grow about 14% from yesterday’s close of $7.30.

Now this comes as  trading is continuing or business conditions are continuing to strengthen around the globe.

Its revenue is growing despite the pandemic and it looks like the business is gaining momentum as expected with more store deals in the U.S..

Lovisa also stated in their results yesterday that it’s focusing on new sites in the U.S. to grow its business there, that’s why LOV was reiterated and bumped up as a Bell Potter buy.

Lastly car dealership business formerly known as A.P Eagers (ASX:APE), now it’s called Eager’s Automotive, was downgraded from a buy down to a hold by Bell Potter as the broker only expects its price to rise about 6% from yesterday’s close.

Now the reason for this is APE did deliver stronger than expected first half results cash was stronger than expected, it’s generating exceptionally strong cash flows despite the pandemic boosted by JobKeeper and rent reductions, but APE didn’t issue a dividend which was a surprise and given APE shares are already up 193% from the COVID-19 low this is why Bell Potter is a bit hesitant about giving a another bullish outlook, hence the downgrade from a buy to a hold.

So watch APE.

I’m Jessica Amir with Bell Direct, happy trading and stay safe.

Close Transcript

Morning Bell 22 February

Sam Kanaan
February 22, 2024

Morning Bell 21 February

Grady Wulff
February 21, 2024

Morning Bell 20 February

Grady Wulff
February 20, 2024

Morning Bell 19 February

Grady Wulff
February 19, 2024

Weekly Wrap 16 February

Sophia Mavridis
February 16, 2024

Morning Bell 16 February

Sam Kanaan
February 16, 2024

Morning Bell 15 February

Sam Kanaan
February 15, 2024

Morning Bell 14 February

Sam Kanaan
February 14, 2024

Morning Bell 13 February

Grady Wulff
February 13, 2024