Australian Broker Call

Morgan Stanley rates ANZ as Equal-weight (3) -

Morgan Stanley believes the major banks face a difficult period because of operating headwinds and regulatory scrutiny. The broker believes the Australian banks' "super cycle" has come to an end.

The combination of high house prices and high levels of household debt suggests to the broker the risk of a housing downturn has increased and credit rationing in some parts of the mortgage market could exacerbate the risk.

Morgan Stanley lowers base case estimates for earnings per share by an average of -2.5% for FY19 and -5% for FY20.

ANZ is the broker's preferred stock among the major banks. Rating is Equal-weight. Target is reduced to $27.60 from $29.00. Sector view is In-Line.

Target price is $27.60 Current Price is $26.58 Difference: $1.02
If ANZ meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $29.41, suggesting upside of 10.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates APO as Hold (3) -

The company has won the right to operate 50 central Sydney billboard sites for the NSW Roads and Maritime Services. Morgans expects the new screens will be slightly accretive from FY19.

The main accretion will come from FY20 onwards from converting current static billboards to digital. Morgans lifts forecast slightly.

Target is raised to $5.68 from $5.35. Hold rating maintained.

Target price is $5.68 Current Price is $5.70 Difference: minus $0.02 (current price is over target).
If APO meets the Morgans target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.63, suggesting downside of -1.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates BEN as Underweight (5) -

Morgan Stanley believes the Australian banks' "super cycle" has come to an end. The combination of high house prices and high levels of household debt suggests to the broker the risk of a housing downturn has increased and credit rationing in some parts of the mortgage market could exacerbate the risk.

Morgan Stanley lowers base case estimates for earnings per share by an average of -2.5% for FY19 and -5% for FY20.

Underweight rating retained, given downward pressure on mortgage margins, modest volume growth and higher costs growth. In-Line sector view. Target reduced to $9.90 from $10.20.

Target price is $9.90 Current Price is $10.31 Difference: minus $0.41 (current price is over target).
If BEN meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.84, suggesting upside of 5.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates BOQ as Underweight (5) -

Morgan Stanley believes the Australian banks' "super cycle" has come to an end. The combination of high house prices and high levels of household debt suggests to the broker the risk of a housing downturn has increased and credit rationing in some parts of the mortgage market could exacerbate the risk.

Morgan Stanley lowers base case estimates for earnings per share by an average of -2.5% for FY19 and -5% for FY20.

Bank of Queensland has benefited from a margin sweet spot, cost controls and improved franchise performance but the broker considers the trading multiples are not cheap and margins are vulnerable. Underweight maintained. Target is reduced to $9.50 from $10.30. In-Line industry view retained.

Target price is $9.50 Current Price is $10.09 Difference: minus $0.59 (current price is over target).
If BOQ meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.67, suggesting upside of 5.8% (ex-dividends)

The company's fiscal year ends in August.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates CBA as Underweight (5) -

Morgan Stanley believes the major banks face a difficult period because of operating headwinds and regulatory scrutiny. The broker believes the Australian banks' "super cycle" has come to an end.

The combination of high house prices and high levels of household debt suggests to the broker the risk of a housing downturn has increased and credit rationing in some parts of the mortgage market could exacerbate the risk.

Morgan Stanley lowers base case estimates for earnings per share by an average of -2.5% for FY19 and -5% for FY20.

CBA remains the broker's least preferred of the major banks and with no EPS growth between FY15 and FY19 and the return on equity falling to 14% from 18% there is risk of a further de-rating. Underweight. Price target is reduced to $64 from $70. Industry view: In-Line.

Target price is $64.00 Current Price is $69.16 Difference: minus $5.16 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $73.75, suggesting upside of 6.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates DMP as Buy (1) -

Data suggest Domino's Pizza has regained download momentum in Australia, growing its share for the first time in two years, the broker notes. France/Germany remains soft. Digital sales account for 70% of A&NZ sales and over 40% in Europe.

The broker now believes the company's seemingly optimistic FY18 guidance might be achievable after all. The upcoming World Cup should also provide a boost for pizza deliveries. Buy and $57.50 target retained.

Target price is $57.50 Current Price is $51.29 Difference: $6.21
If DMP meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $48.64, suggesting downside of -5.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates HT1 as No Rating (-1) -

The metro radio survey 3 results were mixed for the company. Ground has been lost in the key Sydney breakfast slot and Sydney drive slot, although these shows retained their number one FM positions in respective markets.

Macquarie observes the company retains a strong ratings position in Sydney, while Melbourne remains a key opportunity for growth.

The broker is restricted from a recommendation and target.

Current Price is $2.36. Target price not assessed.

Current consensus price target is $2.37, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates MOC as Underperform (5) -

Mortgage Choice is undertaking a review of its franchisee remuneration to reflect a more competitive pricing position. Macquarie had previously highlighted that the diminishing value proposition to brokers is one of the numerous factors jeopardising business sustainability.

A re-basing of its pricing model is considered an important step to ensure viability of the business. As the share price nears valuation and near-term risks remain, the broker retains an Underperform rating. FY19 and FY20 EPS are reduced by -23% and -21% respectively.Target falls to $1.55 from $2.40.

Target price is $1.55 Current Price is $1.56 Difference: minus $0.01 (current price is over target).
If MOC meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates MP1 as Initiation of coverage with Buy (1) -

Megaport is a network-as-a-service provider, connecting customers and the top seven cloud providers across North America, Europe and Asia Pacific on a secure network without the constraints of the traditional telco model. Customers subscribe monthly and can alter their usage, the broker notes.

Consumers will likely be using multiple cloud products in future, hence the broker sees Megaport's growth underpinned by the strucutural shift into the heavens. Coverage initiated with a Buy rating and $5.20 target.

Target price is $5.20 Current Price is $4.23 Difference: $0.97
If MP1 meets the UBS target it will return approximately 23% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates MYO as Initiation of coverage with Underweight (5) -

Accounting software is being disrupted, and SaaS will emerge the winner, Morgan Stanley argues in a fresh 61 page report on the sector. The main conclusion from the report is that the Fast will eat the Slow, instead of the usual Big eats Small.

In the Australian context, this means investors should back Xero's "quick and nimble jump on the cloud wave". Morgan Stanley considers it as a clear winner who's going to take market share from the incumbents. This also implies MYOB is the loser.

Morgan Stanley initiates coverage on MYOB with Underweight rating. Price target $2.80 with the analysts predicting sentiment is likely to remain cautious due to uncertainty about whether the company can monetise its reinvestments. Industry View is Attractive.

Target price is $2.80 Current Price is $2.82 Difference: minus $0.02 (current price is over target).
If MYO meets the Morgan Stanley target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.37, suggesting upside of 19.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates NAB as Underweight (5) -

Morgan Stanley believes the major banks face a difficult period because of operating headwinds and regulatory scrutiny. The broker believes the Australian banks' "super cycle" has come to an end.

The combination of high house prices and high levels of household debt suggests to the broker the risk of a housing downturn has increased and credit rationing in some parts of the mortgage market could exacerbate the risk.

Morgan Stanley lowers base case estimates for earnings per share by an average of -2.5% for FY19 and -5% for FY20.

The broker believes NAB can deliver on its FY18 cost targets but its business mix, reinvestment burden and elevated pay-out ratio leave it vulnerable.

While the bank has stated it intends to hold the dividend this year the broker suggests it is likely to be cut in FY19. Underweight rating. Target is reduced to $25.50 from $27.10. In-Line industry view maintained.

Target price is $25.50 Current Price is $26.35 Difference: minus $0.85 (current price is over target).
If NAB meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.78, suggesting upside of 16.8% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates ORG as Accumulate (2) -

Origin Energy is the first retailer to announce changes to its retail prices, effective July 1. Prices in South Australia and Queensland have been lowered by -1% while NSW and ACT are flat.

Ord Minnett considers the reductions small but they may alleviate market concerns over reduced profitability in FY19. Yet comments regarding NSW and ACT prices suggest to the broker some degradation may occur in retail margins next year.

Accumulate rating and $10.40 target maintained.

Target price is $10.40 Current Price is $9.63 Difference: $0.77
If ORG meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $10.00, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates ORG as Buy (1) -

UBS analysts have lifted oil price forecasts for the next three years to US$73/bbl, US$74/bbl and US$72/bbl, respectively, but left the long-term forecast of US$70/bbl from 2021 onwards unchanged.

This has had a positive impact on earnings estimates across the sector. Price target for Origin has lifted to $11.05 from $10.70 as a result. Buy rating retained.

Target price is $11.05 Current Price is $9.63 Difference: $1.42
If ORG meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $10.00, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates OSH as Neutral (3) -

UBS analysts have lifted oil price forecasts for the next three years to US$73/bbl, US$74/bbl and US$72/bbl, respectively, but left the long-term forecast of US$70/bbl from 2021 onwards unchanged.

This has had a positive impact on earnings estimates across the sector. Neutral rating retained, while the price target gains 30c to $8.50.

Target price is $8.50 Current Price is $8.40 Difference: $0.1
If OSH meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $8.24, suggesting downside of -1.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates RCR as Buy (1) -

Citi lowers FY19 revenue forecasts by -11% to reflect a lack of material contract announcements since the first half result.

The broker continues to forecast 500MW of new solar wins in FY19, although delays the timing of delivery. The short-term opportunity lies in rail while the broker envisages the return of iron ore projects as an opportunity in FY20.

Target reduced to $4.10 from $4.90. Buy rating retained.

Target price is $4.10 Current Price is $3.16 Difference: $0.94
If RCR meets the Citi target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $4.71, suggesting upside of 49.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates SEK as Reduce (5) -

The company has signed two major recruitment agencies, Robert Walters and Page Group, as partners for its Premium Talent Search database. Morgans observes candidate databases such as this benefit from the network affect, and the more users there are the more value.

Initial revenue and earnings impact is likely to be small but the broker expects a contribution to growth over time. As the stock trades above the target of $19.07, a Reduce rating is maintained.

Target price is $19.07 Current Price is $20.56 Difference: minus $1.49 (current price is over target).
If SEK meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.70, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates SGM as Underperform (5) -

Credit Suisse observes some positive developments recently that reduce the earnings risk. China has lifted the one-month US scrap inspection ban that prevented any US scrap cargo from being shipped to China.

Also, US Section 232 interim tariff exemptions revoked on the EU, Canada and Mexico have levelled the playing field relative to Turkey. Turkey could gain some lost US market share. This would be a significant benefit to the company's US export-based business.

Underperform rating and $14.50 target maintained.

Target price is $14.50 Current Price is $16.40 Difference: minus $1.9 (current price is over target).
If SGM meets the Credit Suisse target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.28, suggesting downside of -0.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates SGR as Buy (1) -

Data suggest Australia is maintaining its position as second most popular destination for Chinese tourists, with 23% of all outbound Chinese heading this way in the next 12 months. Chinese tourists account for only 10% of Star's gaming floor spend, the broker notes, but 50-75% of VIP.

The new JV with Chinese partners should add more momentum. The broker has nevertheless trimmed forecasts on a more conservative outlook for floor gaming in general. Target falls to $5.90 from $6.20. Buy retained.

Target price is $5.90 Current Price is $4.83 Difference: $1.07
If SGR meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $6.07, suggesting upside of 25.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates STO as Resume Coverage with Hold (3) -

Ord Minnett resumes coverage with a Hold rating and $5.75 target. As Santos has rejected Harbour Energy's proposal, the broker believes there will be increased pressure on management to outline a positive medium-term outlook.

The broker considers the stock fairly valued compared to its base case valuation. The upcoming capital investment in the Barossa Caldita project, with a final investment decision expected in 2019, and the recent Arcadia expansion are considered essentially backfill opportunities.

Target price is $5.75 Current Price is $5.80 Difference: minus $0.05 (current price is over target).
If STO meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.53, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates STO as Downgrade to Sell from Neutral (5) -

As part of a general sector review, UBS has decided to downgrade Santos to Sell, preferring Woodside Petroleum ((WPL)) and Origin Energy ((ORG)) instead. Target tumbles to $5.45 from $6.40 for Santos.

UBS has lifted oil price forecasts for the years ahead, but nevertheless finds the Santos share price at present represents a price of US$73/bbl, deemed the highest of all the major energy stocks in Australia, and this is seen as excessive.

Target price is $5.45 Current Price is $5.80 Difference: minus $0.35 (current price is over target).
If STO meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.53, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Deutsche Bank rates SUN as Buy (1) -

Deutsche Bank analysts believe there is a case for Suncorp to divest its troubled life insurance operations and redirect the proceeds to shareholders in the form of a special dividend, or otherwise. Buy rating reiterated.

Target price is $14.50 Current Price is $13.87 Difference: $0.63
If SUN meets the Deutsche Bank target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $14.26, suggesting upside of 2.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates SXL as Outperform (1) -

The result of the metro radio survey 3 was mixed but the company is likely to be encouraged by the ratings growth in its Sydney breakfast and Sydney drive markets.

Continued improvement in metro radio presents upside risk to Macquarie's numbers, while the broker considers the valuation metrics remain attractive. Outperform rating and target of $1.18 unchanged.

Target price is $1.18 Current Price is $1.22 Difference: minus $0.04 (current price is over target).
If SXL meets the Macquarie target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.11, suggesting downside of -8.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates VCX as Neutral (3) -

The company intends to dispose of up to $1.0bn of sub-regional and neighbourhood shopping centres that are considered non-core. Proceeds will be reinvested into the development pipeline.

Should the full asset sale program be successful, the company will also consider other capital management options, although acquisitions are not ruled out. Credit Suisse is supportive of the divestment strategy but remains cautious about the speed at which the asset sales can occur.

Neutral call. $2.79 target maintained.

Target price is $2.79 Current Price is $2.68 Difference: $0.11
If VCX meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.81, suggesting upside of 4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates WBC as Equal-weight (3) -

Morgan Stanley believes the major banks face a difficult period because of operating headwinds and regulatory scrutiny. The broker believes the Australian banks' "super cycle" has come to an end.

The combination of high house prices and high levels of household debt suggests to the broker the risk of a housing downturn has increased and credit rationing in some parts of the mortgage market could exacerbate the risk.

Morgan Stanley lowers base case estimates for earnings per share by an average of -2.5% for FY19 and -5% for FY20.

Equal-weight. Target is reduced to $27.50 from $30.50. Industry view: In Line.

Target price is $27.50 Current Price is $27.56 Difference: minus $0.06 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $31.41, suggesting upside of 14.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates WHC as Outperform (1) -

The company has now acquired 100% of Winchester, following the purchase of the 25% minority stake. Credit Suisse incorporates ownership of the project and an assumption that the US$67m payment for the residual 25% comes out by June 30.

The broker calculates the company can pay out a 50% final dividend and still have money left over for a special dividend at the results, leaving it at the end of 2018 in a net debt neutral position. A $500m buyback is assumed in FY19 and FY20.

Outperform rating and $4.60 target maintained.

Target price is $4.60 Current Price is $5.46 Difference: minus $0.86 (current price is over target).
If WHC meets the Credit Suisse target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.76, suggesting downside of -12.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates WPL as Buy (1) -

UBS analysts have lifted oil price forecasts for the next three years to US$73/bbl, US$74/bbl and US$72/bbl, respectively, but left the long-term forecast of US$70/bbl from 2021 onwards unchanged.

This has had a positive impact on earnings estimates across the sector. Price target lost 50c to $37. Buy rating retained.

Target price is $37.00 Current Price is $32.98 Difference: $4.02
If WPL meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $32.67, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates XRO as Initiation of coverage with Overweight (1) -

Accounting software is being disrupted, and SaaS will emerge the winner, Morgan Stanley argues in a fresh 61 page report on the sector. The main conclusion from the report is that the Fast will eat the Slow, instead of the usual Big eats Small.

In the Australian context, this means investors should back Xero's "quick and nimble jump on the cloud wave". Morgan Stanley considers it as a clear winner who's going to take market share from the incumbents. This also implies MYOB is the loser.

Morgan Stanley initiates coverage on Xero with Overweight rating. Price target $50. Industry View is Attractive.

Target price is $50.00 Current Price is $43.97 Difference: $6.03
If XRO meets the Morgan Stanley target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $40.52, suggesting downside of -7.8% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources