These ASX shares just got hit by broker downgrades

These ASX shares could be facing come profit taking as we head to the financial year close after brokers downgraded…

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ASX shares broker downgrade three buttons indicating thumbs up, neutral and thumbs down broker ratings on ASX share market

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These ASX shares could be facing come profit taking as we head to the financial year close after brokers downgraded their recommendation on the stocks.

Investors could also be tempted to lock in some gains with the S&P/ASX 200 Index (Index:^AXJO) hitting a record high yesterday.

Less hopeful outlook for this ASX share

One of these candidates could be the New Hope Corporation Limited (ASX: NHC) share price.

It’s raced up to a more than one-year high of $1.83 on Thursday and Macquarie Group Ltd (ASX: MQG) has just cut its rating to “neutral” from “outperform”.

The downgrade comes even as the broker increased its coal price forecast. The problem for the New Hope share price is that Macquarie upgraded the “wrong” type of coal.

Wrong coal feeds broker downgrade

Macquarie is feeling more upbeat about “met” coal, which is used to produce steel. It isn’t that taken with thermal coal (used in power plants) and has left its price estimates unchanged. No prizes for guessing which coal New Hope produces.

This might surprise some as the price of thermal coal has really fired up. But as reported, China is trying to impose price controls on this commodity to cap its rise. I don’t think the move will succeed but it does introduce a potential headwind for thermal coal.

Macquarie’s 12-month price target on the New Hope share price is $1.70 a share.

Upgrade can’t save a downgrade

Another outperformer that could be facing some pressure today is the Johns Lyng Group Ltd (ASX: JLG) share price.

The building construction group’s shares have surged by two thirds over the past year and Bell Potter reckons its time it took a breather.

The broker downgraded the Johns Lyng share price to “hold” from “buy” even after management upgraded its FY21 guidance.

Shooting past fundamentals

The company increased its revenue guidance by around 6.5% to $558.2 million. It also upgraded its earnings before interest, tax, depreciation and amortisation (EBITDA) by circa 10% to $52.1 million.

That is above Bell Potter’s estimates of $541.4 million and $48.9 million, respectively.

Bell Potter acknowledges that the group is in a “solid position” to deliver growth and has a strong pipeline of work.

What is the Johns Lyng share price worth?

“The company continues to be a catalyst rich and we remain optimistic about the company’s cross sell opportunity into the strata management, as well as the potential for accretive acquisitions,” said Bell Potter.

“However, following strong trading in the stock, JLG is now trading on a P/E of 49x FY21e and 44x FY22e.”

Bell Potter’s 12-month price target on the Johns Lyng share price is $4.40 a share.

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Brendon Lau owns shares of Macquarie Group Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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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