On Monday I had a look at a few shares that had found favour with brokers this week and been given the much-coveted buy rating.
Today I thought I would look at the shares which have fallen out of favour with brokers and been given the dreaded sell rating.
Three that caught my eye are listed below. Here’s why they are tipped as sells:
Caltex Australia Limited (ASX: CTX)
According to a note out of Morgan Stanley, it has retained its underweight rating and $26.00 price target on the fuel supplier’s shares. The broker believes that investors ought to be cautious amid speculation that Puma Energy might be interested in acquiring the petrol stations owned by Woolworths Group Ltd (ASX: WOW). Its analysts suspect that it would be unlikely that Caltex would be contracted by Puma to supply its fuel, putting future earnings at risk. I think that Morgan Stanley makes a great point and would suggest investors approach Caltex with caution.
Myer Holdings Ltd (ASX: MYR)
A note out of Citi reveals that it has retained it sell rating and 41 cents on the department store operator’s shares. The broker expects Myer to report a 4.9% drop in quarterly sales when it provides its quarterly update imminently. Furthermore, it has concerns that the warm start to winter could be having a negative impact on the company’s sales, potentially putting it on a path towards breaching its debt covenants. I would have to agree with Citi on Myer. While its shares do look dirt cheap, I am concerned that they could prove to be a value trap.
Telstra Corporation Ltd (ASX: TLS)
Analysts at Citi have also retained their sell rating on this telco giant after its recent trading update. The broker has, however, cut its price target down from $3.10 to a lowly $2.70. The broker believes that its recent update highlights a quicker than expected decline in its core earnings. Citi doesn’t see many options for Telstra to grow its core earnings but thinks asset sales and more aggressive cost-cutting ought to be considered. While I don’t think I would be a seller of Telstra’s shares if I owned them, I would probably hold off an investment until the dust settles on this latest update. It may bring about an attractive buying opportunity.
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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 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 Scott Phillips.