Investors are in a buying mood with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index close to breaking into record territory as we head into the all-important August profit reporting season.
The top 200 benchmark jumped 0.7% ahead of the close on Wednesday as market expectations for the reporting season improved.
But if you are looking for stocks to take profit on or to potentially avoid before next month's results releases, here are the latest three ASX-stock that copped a downgrade by top brokers.
Not everything that glitters is gold
The Regis Resources Limited (ASX: RRL) share price is the worst performer on the ASX 200 index today with a 12% nosedive to $5.70 after UBS downgraded the stock to "sell" from "neutral" following the gold miner's latest quarterly production report.
This could mark the end of RRL's golden run that saw the stock rally close to 30% over the past year before today's brutal sell-off.
Investors had been buying the stock due to the record high gold price in Australian dollar terms but Regis may not be as big a beneficiary of this as previously thought.
"Lower than expected production, higher costs and a $186m out-of-the money hedge book limit Regis' leverage to this higher gold price," said UBS which has a $4.85 a share price target on Regis.
"The record A$ gold price of ~A$2,000/oz is ~A$300/oz higher y/y, but Regis cost guidance implies only ~50-70% of this lift is translating into higher cash margins. The share price is now trading at a ~30% premium to our NPV."
Floundering ship
Another laggard on the market today is the Austal Limited (ASX: ASB) share price. Shares in the shipbuilder sunk 4.5% to $3.93 in the last hour of trade as Citigroup torpedoed the stock by cutting its rating to "neutral" from "buy".
The downgrade comes after a stellar run in its share price that's backed by expectations of rising margins from its lower cost Philippines shipyard and potential new US Navy contracts.
"Austal continues to have multiple medium to long term earnings growth drivers," said Citi. "However, we downgrade Austal to Neutral given the share price has appreciated 87% since 28 Mar 19, noting the stock now trades on ~21x FY20E EPS, which is a 19% premium to peers.
"With the FY19 result largely pre-reported and FFG(X) contract to be awarded in late CY20, the stock also appears to be lacking short-term catalysts."
Citi has a price target of $4.04 per share.
Running out of gas
The Senex Energy Ltd (ASX: SXY) share price is also underperforming the market today with a drop of 2.8% to 34 cents.
The oil and gas company copped a downgrade from Credit Suisse to "neutral" from "outperform" after the release of its Q4 production report.
While second half revenue of $51.3 million was largely inline with what the broker was expecting, it is wary about the risks relating to the gas ramp up at Roma North.
"We see material upside to SXY once North Roma and Project Atlas are at plateau (target end FY21). SXY's prized uncontracted gas supply position is also likely to benefit from higher gas prices post 2021, and new acreage acquisitions portend future growth," said Credit Suisse.
"But nearer-term risks during project ramp up could sustain negative sentiment, and balance out upside in our view."
The broker kept its price target of 37 cents on the stock.
