Leading brokers name 3 ASX shares to sell today

Brokers are recommending investors sell these ASX shares…

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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below. Here’s why these brokers are bearish on these ASX shares:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Citi, its analysts have retained their sell rating and $5.85 price target on this infant formula company’s shares. The broker notes that UK multinational consumer goods company Reckitt has divested its China-based infant formula business for an enterprise value of US$2.2 billion. While this deal makes a2 Milk look cheap on paper based on its multiples, the broker believes they are very different businesses. Furthermore, a2 Milk’s sales mix is changing and it lacks local manufacturing. Citi also sees the sale as a sign that success in China is becoming increasingly challenging for foreign infant formula brands. The a2 Milk share price is fetching $5.76 today.


A note out of Morgans reveals that its analysts have downgraded this stock exchange operator’s shares to a reduce rating with a $65.87 price target. This follows the release of the company’s trading update for the month of May. It appears to have found the update underwhelming, noting that capital raisings and IPOs were the only highlight from the month. And with Morgans not anticipating any real improvements in the second half, it feels its shares are overvalued at the current level. The ASX share price is trading at $74.30 this morning.

Fortescue Metals Group Limited (ASX: FMG)

Another note out of Morgans reveals that its analysts have downgraded this iron ore producer’s shares to a reduce rating with an $18.70 price target. The broker made the move on the belief that the iron ore cycle is maturing and cost pressures are building in Western Australia. It suspects the latter could lead to a softer than expected fourth quarter performance. Morgans also has a few concerns over the Iron Bridge operation, stating that further downgrades cannot be ruled out. The Fortescue share price is fetching $22.69 today.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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