Successful investing isn't just about buying good stocks, avoiding bad stocks is equally important.
With that in mind, it could pay to listen to what Goldman Sachs is saying about the two ASX 200 shares in this article.
The broker has just named one as a buy and the other as a sell. Here's what it is saying:
Image source: Getty Images
ASX Ltd (ASX: ASX)
Goldman continues to believe that this stock exchange operator should be avoided.
In response to the company's update on its CHESS replacement project, the broker has reaffirmed its sell rating and $59.50 price target on its shares.
Based on the current ASX share price of $66.53, this implies potential downside of 10.5% for investors.
Commenting on its sell rating on the ASX 200 share, Goldman Sachs said:
We are Sell rated on ASX because: 1) Capex guidance remains elevated into FY25-FY27 from ongoing CHESS replacement project and technology revamp with risks on execution. 2) Risks arising from enhanced regulatory scrutiny on CHESS replacement and other technology projects and ASIC action. 3) Potential upside from a further recovery in cyclical revenues from here is likely to be small with D&A drag to result in more muted earnings growth. 4) ASX's Clearing and Settlement ROE is well below Group ROE target.
Megaport Ltd (ASX: MP1)
The ASX 200 share that could be a great buy according to Goldman is Megaport.
It is a network as a service provider. It offers cloud connectivity and networking solutions, selling products through both its direct (inhouse) and indirect (partner) go-to-market channels.
In response to the company's annual general meeting update, the broker has reaffirmed its buy rating with a trimmed price target of $10.40. Based on its current share price of $7.73, this implies potential upside of 35%.
While a touch disappointed with management's revenue guidance for FY 2026, it remains positive and sees plenty of value on offer with its shares at current levels. It said:
Megaport reiterated its FY25 revenue and EBITDA guidance, but noted that it believes FY26 revenue growth will be largely consistent with the trends seen in FY25 (i.e. implies +10-14% rev growth vs GSe/VAe prior +15%). […]
We believe MP1 will benefit from strong structural tailwinds from the adoption of public cloud including multi-cloud usage and the transition towards NaaS technologies. While acknowledging mixed near-term execution around the partner channel and the new MVE product, we are Buy rated on the name as we remain confident MP1 has a clear product advantage vs. peers and a decade-long runway for robust growth. Despite the soft operational trends in recent periods, we expect still robust top-line growth, with the increased focus on profitable growth supporting an attractive earnings profile over FY25-26.
