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4 broker upgrades to kick off the trading week

Carin Pickworth
mining

Big-name brokers have placed notable upgrades on these 4 S&P/ASX 200 stocks to kick off the trading week.

Fortescue Metals Group Ltd (ASX: FMG)

Shares in iron ore production and exploration company Fortescue Metals Group Ltd are up 0.4% to $4.60 at the time of writing as private wealth stalwart Ord Minnett has upgraded the stock from hold to accumulate.

Ord Minnett believe the Fortescue share price is back in “value territory” as the benchmark iron ore price has plunged 17% in the last month.

The broker has concerns about low grade iron ore discounts but says the price of US$40/t still provides Fortescue with a margin on its operating earnings of 40%.

The upgrade by Ord Minnett is coupled with a share price target downgrade – dropping from $5.60 to $5.00 – as discounts for lower-grade iron ore come into play.

AGL Energy Ltd (ASX: AGL)

Shares in integrated energy company AGL Energy Ltd are back on the up today – rising 1.4% to $20.92 after 12-months of share price slides from the stock.

Citigroup has upgraded AGL Energy to neutral from sell today after an analysis of the data on the entry of Alinta to the east coast market.

The Citi broker believes earnings estimates out of AGL signal complacency but are relative to the risk posed by retail competition from the likes of Origin Energy Ltd (ASX: ORG) which is also booking gains this week. Origin shares are up 3.3% to $9.33 at the time of writing.

The Citi broker has raised its share price target on AGL from $20.54 to $21.28.

Amcor Limited (ASX: AMC)

Global packaging company Amcor Limited has been upgraded from underweight to equal-weight by Morgan Stanley today as the company shows early signs of recovery from a number of cyclical pressures it has faced in the last 12-18 months.

Shares in Amcor were up slightly to $14.09 at the time of writing but have been on a definitive downward spiral in the last year, dropping just over 8% from its $15.33 share price at this time last year.

The Morgan Stanley broker said Amcor now looks better placed to deal with cost inflation pressures but is currently trading at an 18% discount despite possessing a growth profile that is consistent with industrials.

Morgan Stanley has raised its price target on Amcor from $14.40 to $14.80 but is taking a “cautious industry view”.

Charter Hall Long WALE REIT (ASX: CLW)

Shares in property fund management company Charter Hall Long WALE REIT are down today to $3.98 at the time of writing as UBS announced an upgrade on the stock to buy from neutral.

The UBS broker says the upgrade is based on valuation, with Charter Hall Long trading at a 7% yield with a 3% compound growth rate at a 2% discount to net tangible assets and a 6% discount to the broker’s valuation of $4.25.

UBS has issued the buy rating despite its valuation on the REIT stock being at risk from rising interest rates.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.