The market is extending its rally following the US presidential elections, but brokers have downgraded some ASX stocks to the naughty list.
The S&P/ASX 200 Index (Index:^AXJO) jumped a further 1.6% as we head into the close with every sector trading in the black.
But one stock that’s heading in the opposite direction is the Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC) share price.
Second wave prompts downgrade of ASX stocks
Shares in the hospital operator tanked 2.9% to $67.48 at the time of writing after Credit Suisse downgraded the stock to “neutral” from “outperform”.
“While we continue to believe that RHC will be a beneficiary of a volume tailwind post COVID‐19, there remains significant near‐ term earnings pressure for RHC’s offshore divisions with rising COVID‐19 cases in Europe,” warned Credit Suisse.
Increased hospital admission rates for COVID cases will hamper Ramsay’s ability to undertake more profitable elective surgeries.
It looks as though Ramsay’s facilities in France and the UK will take a hit due to a significant second wave of the disease.
Credit Suisse’s price target on the Ramsay share price is $70 a share.
Longer than expected recovery from pandemic
Meanwhile, the CSL Limited (ASX: CSL) share price was also downgraded, although that didn’t stop it from rising 0.8% to $307.06 in late trade.
Citigroup cut its rating on the blood treatment company to “neutral” from “buy” as it believes that COVID-19 is impacting on its operations.
“In the last few weeks, we had quarterly results from key competitors and suppliers including Takeda, Grifols, and Haemonetics,” said Citi.
“All noted the plasma product demand remains unchanged, however collections have been impacted by COVID-19.”
The broker believes that plasma collection will only return to normal levels in Jan 2021 compared to its earlier prediction of October 2020.
Citi’s 12-mopnth price target on the CSL share price is $320 a share.
New tech casualty from COVID rotation
News of the possible COVID vaccine triggered a large sell-off in tech stocks. It also gave Bell Potter a reason to chop its recommendation on the Macquarie Telecom Group Ltd. (ASX: MAQ) share price to “hold” from “buy”.
“With its focus on Data Centres (DCs) and the cloud, MAQ too has seen a large share price rise over the past year,” said the broker.
“While we view MAQ’s rise as justified on account of its long-term DC and cloud growth outlook, with an anticipated rotation towards more cyclical names as a US and Australian re-opening gains greater focus and COVID fear subsidies, MAQ’s shares may see some near-term selling pressure.”
Bell Potter’s 12-month price target on the stock is $52.40 a share.
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BrenLau owns shares of CSL don Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Ramsay Health Care 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.
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