Earlier today I had a look at a few shares that are in favour with brokers and have been given buy ratings this morning.
Now I thought I would have a look at the shares that have fallen out of favour with brokers and been given the dreaded sell rating.
Two sell recommendations that caught my eye this week are listed below. Here's why brokers think you should avoid them:
Baby Bunting Group Ltd (ASX: BBN)
According to a note out of Citi, its analysts have retained their sell rating and $1.20 price target on the baby products retailer's shares following its recent market update. That update revealed that two more of Baby Bunting's competitors, Baby Bounce and Baby Savings, have recently entered administration. Citi is concerned that potential clearance activities from these competitors could put pressure on the company's sales, putting it at risk of falling short of its full year guidance. While the broker does note that these closures are a positive in the long term and could lead to market share gains, in the short term it suspects Baby Bunting could struggle. While I agree with Citi that this could be a short term headwind, I think this has been largely built into its share price now. Because of this, I would class it as being closer to a buy than a sell. But only for patient investors that are willing to hold onto its shares for a number of years.
Oil Search Limited (ASX: OSH)
Another note out of Citi reveals that its analysts have retained their sell rating and $6.60 price target on the energy company's shares. According to the note, the broker was pleased with its recent update that advised of an increase in gas resources in the P'nyang field. On Thursday Oil Search advised that its certified 1C gross contingent gas resource had more than tripled to 3.51 trillion cubic feet (tcf), while its certified 2C contingent gas resources had increased to 4.36 tcf. While this is good news, the broker is concerned that earthquakes could ultimately impact production results. Because of this, it has held firm with its recommendation. I think Citi makes great points on this one as well, though I would class it as a hold. It might have even been a buy in my eyes had there not been better value options in the sector with more diversified operations.
