On Monday I looked at a few shares that had found favour with brokers this week and were given buy ratings.
Today I thought I would look at the shares that are out of favour and tipped as sells by leading brokers. Three that caught my eye are listed below:
Beach Energy Ltd (ASX: BPT)
According to a note out of the Macquarie equities desk, it has retained its underperform rating and $1.75 price target. The broker believes that Beach Energy’s shares are expensive at the current level and suspects that the market has underestimated the capital expenditure required to sustain and grow its production. The broker expects these details to be revealed in the near future when Beach Energy holds its next investor session. I think Macquarie makes some fair points here. And while I wouldn’t necessarily be a seller of its shares if I owned them, I wouldn’t be a buyer unless they were trading at a lower price.
Challenger Ltd (ASX: CGF)
A note out of Morgan Stanley reveals that its analysts have retained their underweight rating and $10.50 price target on the annuities company’s shares. According to the note, the broker is concerned that Challenger’s shares could be negatively impacted by a delay to the MyRetirement implementation. Morgan Stanley believes that the company’s leading position in the annuities market would mean it is a major winner from the proposals. Based on the broker’s forecasts, Challenger’s shares are trading at 19x forward earnings. I think this is a touch expensive given its current growth profile and would suggest investors wait for a better entry point.
Commonwealth Bank of Australia (ASX: CBA)
Another note out of Morgan Stanley reveals that its analysts have retained their underweight rating and $65.00 price target on this banking giant’s shares. According to the note, the broker appears concerned that the upcoming Royal Commission interim report could weigh on investor sentiment when it is released by the end of the weekend. That report will include recommendations which some fear could result in further tightening in bank lending. While I think that Morgan Stanley makes a great point here, I feel this has largely been priced into bank shares already. As a result, I wouldn’t be a seller of CommBank’s shares if I owned them.
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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 Challenger 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.