Yesterday I took a look at a few shares which leading brokers had slapped buy ratings on this week.
Today I thought I would look at the ones they think investors should be avoiding. They are listed below:
Beach Energy Ltd (ASX: BPT)
According to a research note out of Macquarie, its analysts have reiterated their underperform rating and 60 cents price target on the energy company. Macquarie downgraded its earnings expectations for Beach following operational issues, an oversupply of LNG, and lower-than-expected oil prices during the quarter. As I’m quite bearish on oil prices moving forward, I would have to agree with Macquarie on this one. Furthermore, I feel there are far better options in the resources sector that offer a greater risk/reward.
Telstra Corporation Ltd (ASX: TLS)
Analysts at Citi have reiterated their sell rating and $4.00 price target on the telco giant. According to the note, Citi expects Telstra to cut its dividend to 25 cents from FY 2018. However, the broker doesn’t believe this is enough and has suggested that the company cut its dividend deeper in order to direct funds to either share buybacks or earnings accretive acquisitions. Whilst I feel that Citi makes some valid points, I do believe it is overlooking the considerable cost savings that the company could make over the coming years. For this reason I wouldn’t be in a rush to sell, though it is certainly worth acknowledging that it is a higher risk investment than in previous years.
Treasury Wine Estates Ltd (ASX: TWE)
Yesterday Morgan Stanley reiterated its overweight rating and $14.00 price target on Treasury Wine. One broker that doesn’t agree with this view is Citi. According to a note released this morning, the investment bank has reiterated its sell rating and $10.50 price target. Citi believes its earnings growth could pause due to a weaker vintage and higher administration costs. While it expects things to improve from FY 2019 onwards, the broker appears to believe investors should stay clear of the wine company until then. As I’m very bullish on its long-term growth prospects, I would be inclined to side with Morgan Stanley and continue to hold onto its shares.
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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Telstra Limited. 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 Bruce Jackson.