The market may have closed at a high on Tuesday but not all stocks enjoyed a good day as they got slapped by broker downgrades.
So while the S&P/ASX 200 Index (Index:^AXJO) is on track to close near its intraday high of 0.7% today, the same can't be said for the JB Hi-Fi Limited (ASX: JBH) share price and two other stocks in the index.
The JBH share price slumped 3.4% to $47.93 in the last hour of trade after Bell Potter downgraded the stock to "sell" from "hold".
Image source: Getty Images
Past its peak
While the electronics retailer posted a solid full year profit result that saw underlying net profit surge 33.2% to $332.7 million and double-digit like-for-like sales at Good Guys and JB Hi-Fi's chain, this could be as good as it gets for the group.
"The 2H20/July sales surge is clearly not sustainable, so the question is what is being priced in for a more normalised sales outlook in FY22," said the broker.
"On the back of recent share price strength, our BPe FY22 PE has increased to ~20x which we believe is excessive."
While Bell Potter cut its rating on the stock, it lifted its 12-month price target to $44 from $38.50 a share.
From upgrade to downgrade
Another stock to suffer a sell-off today is the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price. The bank stock lost 1.7% at the time of writing to trade at $6.43 after JPMorgan changed its recommendation to "neutral" from "overweight".
The broker only upgraded the stock in June but conceded that the tailwinds that drove its bullish change of heart were short-lived.
These tailwinds were the belief that Bendigo Bank had a funding cost advantage over its peers, a defensive loan book that's better protected from bad debts and less pro-cyclicity of capital.
Can't bank on tailwinds
However, these bullish assumptions have lost their puff. The bank may have enjoyed an edge when it came to funding cost, but its waning more quickly than expected. This means Bendigo Bank's net interest margin is likely to come under significant pressure over the medium-term.
The strict second lockdown in Victoria is also posing a big threat as 50% of the bank's commercial loan deferrals are from that state.
"With BEN's CET1 ratio sitting at just 9.25%, we think it will struggle to grow its loan book fast enough to offset margin pressures," said JPMorgan.
The broker's price target on the stock is $6.70 a share.
In need of topping up
The third stock to fall out of favour today is the Viva Energy Group Ltd (ASX: VEA) share price, which tumbled 6% to $1.70 ahead of the market close.
The weakness may have been triggered by Morgans downgrade of the petrol station operator to "hold" from "add" in the wake of its profit results.
Viva's profit performance actually wasn't bad at all given the challenging COVID-19 environment and shareholders were showered in cash from its $500 million plus capital return and special dividend.
Victoria poses a risk
"VEA earnings remain sensitive to a continued recovery in Australian travel, and eventual reopening of Victoria," said Morgans.
"Although trading near 5x FY21F EBITDA we view this upside as starting to be factored into VEA after recent share price strength."
The broker's price target on the stock is $1.95 a share.
