The threat of a new cold war between China and US allies aren't enough to dent the positive mood on our market.
The S&P/ASX 200 Index (Index:^AXJO) jumped 1.5% during lunch time trade as confidence about the post-coronavirus recovery grows.
But rebounding share prices might be an opportunity to take some profit off the table or to lock in tax-losses to offset FY20 capital gains. Here are the latest sell ideas from top brokers.
Losing bet
One stock in the firing line is Tabcorp Holdings Limited (ASX: TAH) as Citigroup initiated coverage on the lottery and wagering group with a "sell" recommendation.
The broker believes the stock is facing a growth challenge as the run of big lottery jackpots that have driven past sales is running out of puff.
The closure of wagering outlets due to the COVID-19 pandemic and an uncertain sports betting outlook are other factors weighing on the stock.
Lottery earnings aren't that stable
The view that Tabcorp's lottery business deserves to trade at a big premium to the market as it's seen to be as dependable as infrastructure assets is also misguided, according to Citigroup. This is because lottery sales fluctuate with discretionary spending, surge and ebb with jackpots and have no inflation protection.
If the group wants to break out of its low growth rut, it will need to either expand into the US sports betting market, enter Western Australia lotteries, open new wagering outlets in WA and New Zealand and internalise online lotteries.
That last point will be especially worrying for Jumbo Interactive Ltd (ASX: JIN), in my view. It suggests Tabcorp might stop Jumbo from selling lotteries so it can monopolise the channel.
Citi's price target on Tabcorp is $2.80 a share.
Time to sell
Meanwhile, the surge in the Afterpay Ltd (ASX: APT) share price to a new record high today could be a signal to sell, if you believe UBS.
The broker reiterated its "sell" recommendation on the buy now, pay later group even after management reported having five million active customers in the US.
The COVID-19 shutdown that is driving a spike in online sales provides an additional tailwind to Afterpay as 76% of its Australia and New Zealand sales were done via the web in 1HFY20.
"While we think COVID-19 could accelerate positive structural changes for APT, we are cautious to extrapolate the magnitude of recent growth in online's share given the recent forced closures of shops," said the broker.
Priced beyond perfection
Further, while the latest update from Afterpay is better than most were expecting, UBS thinks the good news is more than priced into the stock.
The broker is assuming Afterpay will secure 9.7 million active users by June, which is higher than management's withdrawn guidance of 9.5 million.
Even on the more optimistic projection, UBS reckons fair value for Afterpay is $14 a share. That is a long drop from the nearly $48 level the stock is currently trading at.
