Leading brokers slap sell ratings on these ASX shares

With earnings season going up a gear this week, brokers up and down Australia have been especially busy.

Two shares that have not fared too well and have been given sell ratings are listed below. Here’s why brokers are bearish on them:

Flight Centre Travel Group Ltd (ASX: FLT)

According to a note out of the Macquarie equities desk, its analysts have retained their underperform rating and $42.20 price target on the travel agent’s shares following the release of the Helloworld Travel Ltd (ASX: HLO) half-year result yesterday. Macquarie appears concerned that Helloworld is gaining market share and is becoming a competitive threat. Furthermore, its analysts see downside risk to airfare pricing and a possible de-rating of its shares. Considering the strong gain its shares have made over the last 12 months, it might not be a bad idea to take at least a bit of profit off the table ahead of its results release this week.

InvoCare Limited (ASX: IVC)

A note out of UBS reveals that its analysts have retained their sell rating and reduced the price target on the funeral operator’s shares from $16.10 to $13.65 following the release of its half-year update. Those results came in weaker than its analysts expected and its outlook failed to impress. The broker appears to believe that the company’s weak outlook and potential increases in interest rates will lead to InvoCare’s shares being forced to trade on a lower multiple. Whilst I am a big fan of InvoCare, I would have to side with UBS on this one. Although the company has defensive qualities, I’m not sure it will be enough to command such a premium over the market average. Especially when interest rates start to rise and risk-free treasury bonds offer more compelling yields. In light of this, I would wait for InvoCare to fall to a more attractive entry price.

While those shares may be sells, I think these top shares ought to be classed as strong buys.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Helloworld 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.

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