The S&P/ASX 200 Index (Index:^AXJO) snapped a two-day winning streak which wasn't helped by broker downgrades of a number of popular ASX stocks.
The top 200 benchmark fell 0.9% on Thursday as it tried and failed to reclaim the psychologically important 6,000 level.
Experts remain divided on whether the fundamentals justify the big market bounce from its bear market low 13 weeks ago.
But there's little doubt that some outperforming ASX shares are overbought, according to these leading brokers.
Downshifting to neutral
One runaway that got downgraded today by Macquarie Group Ltd (ASX: MQG) is the Carsales.Com Ltd (ASX: CAR) share price.
Shares in the online auto classifieds group surged by nearly 70% since the market bottomed and its latest upbeat trading update is adding fuel to the red-hot fire.
Management reported a sharp uptick in lead volumes as demand for personal transport jumped in this COVID-19 era.
But the analysts at Macquarie think these tailwinds are one-off in nature and cannot be sustained.
"We see the good news in the update as a boost to near-term earnings, although longer-term earnings implications are more modest," said the broker.
Macquarie cut its recommendation on the stock to "neutral" from "overweight" with a price target of $18 a share.
Good stock at wrong price
Another outperformer that got downgraded following its latest trading update is Ansell Limited (ASX: ANN).
Citigroup lowered its recommendation on the stock to "neutral" from "buy" despite the good demand outlook for the company's gloves and protective equipment.
Management reiterated its FY20 guidance and said its chief executive Magnus Nicolin will delay his retirement by six months to steer the company through to the other side of the COVID-19 crisis.
The broker also praised Ansell for not engaging in price gouging, like its rivals, as such a move is only good in the short-term but harmful in the longer run.
Nonetheless, the 65% surge in the Ansell share price from the market bottom (which takes it to near record highs), prompted Citi to downgrade the stock.
The broker's price target on Ansell is $35 a share.
Mega surge prompts downgrade
Meanwhile, the Megaport Ltd (ASX: MP1) share price is also trading above its pre-coronavirus high. This prompted Morgans to downgrade its call on the stock to "hold" from "add".
The stock outperformed as demand for its services jumped with more people working from home and needing connection to the cloud.
"MP1's share price has rallied ~122% in the last twelve months and performed strongly after dropping significantly in the March market selloff," said Morgans.
"We continue to rate the business and outlook positively. However, the MP1 share price now sits within 10% of our revised price target."
The broker's 12-month price target on the stock is $14.14 a share.
