On Tuesday I looked at three ASX shares that had been given buy ratings by brokers this week.
Unfortunately, not all shares are in favour with brokers and some have been given the dreaded sell rating.
Three that caught my eye are listed below. Here's why they have been named as sells:
Metcash Limited (ASX: MTS)
According to a note out of Citi, its analysts have retained their sell rating and $2.55 price target on the wholesale distributor's shares following its results release this week. Although Metcash's shares look cheap, the broker believes that this is for a reason and fears that more customer losses could be on the horizon. Metcash recently advised that Drakes South Australia was likely to end its supply agreement next year. In addition to this, Citi doesn't see too much merit in conducting a share buyback. I completely agree with Citi on Metcash and think investors ought to stay clear of the company's shares.
Synlait Milk Ltd (ASX: SM1)
A note out of Credit Suisse reveals that its analysts have retained their sell rating but increased the price target on the dairy producer's shares to NZ$7.34 (A$6.82). Last week Synlait announced that its new nutritional manufacturing site in Waikato will be commissioned for the 2019/2020 season at a cost of NZ$250 million. Although the broker thinks this is a sign that Synlait is confident that demand for its products will grow strongly in the future, it still can't get passed its current valuation. Especially given how concentrated its customer base is. While I wouldn't be a seller if I owned its shares, I wouldn't be a buyer at these levels.
TPG Telecom Ltd (ASX: TPM)
Analysts at Goldman Sachs have reiterated their sell rating and $4.70 price target on TPG Telecom's shares. According to this morning's note, the broker believes that the challenges facing the company have intensified since it first downgraded its shares in April. Although it notes that NBN margin headwinds may lessen in FY 2019, the broker remains concerned by the competitive pressures across each of the markets and its stretched balance sheet ahead of spectrum bidding. I would agree with Goldman on this one and would suggest investors stay clear of it.
