3 buys & 3 sells for 2019

Financial journalist and commentator on 3AW and Sky Business
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1. Baby Bunting (BBN, $2.16)
Market capitalisation: $272 million
FY19 forecast yield: 3.7%, fully franked
Three-year total return: –0.2% a year
Analysts’ consensus target price: $2.72

I nominated baby goods retailer Baby Bunting in April as a fallen star: the stock had been caught up in the general fear that no retailer could survive the arrival of Amazon Prime in Australia – especially as the stock market knew that Amazon was a major player in the baby goods category in the US. But there has been a huge change of view in the market since then, with Baby Bunting now viewed as dominating its market, and heading down the track towards Bunnings-like status in the $2.4 billion baby goods sector. The discounting problems that caused Baby Bunting to slash its profit guidance in November 2017 have now washed-through the sector – Baby Bunting reported a 9% rise in revenue to $303 million in FY18, but a 29% fall in net profit to $8.7 million – and its profit guidance for FY19 was lifted in October and then again in November, on the back of strong sales in the first 20 weeks of the financial year. Baby Bunting has been re-rated significantly, but still looks very rewarding buying at these levels.

2. Afterpay Touch (APT, $11.97)
Market capitalisation: $2.7 billion
FY19 forecast yield: no dividend expected
Three-year total return: n/a
Analysts’ consensus target price: $19.15

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