S&P/ASX 200 Index (ASX: XJO) shares are 0.8% lower at 8,968.4 points on Thursday.
Brokers have reduced their ratings on several ASX 200 shares this week.
Let's take a look at some of them.
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Wesfarmers Ltd (ASX: WES)
The Wesfarmers share price is $88.88, down 1.9% today and up 5% over 12 months.
Jefferies downgraded Wesfarmers shares to a hold rating after the conglomerate said it and joint-venture partner SQM would expand their Mt Holland lithium mine.
Wesfarmers said it expected to chip in between A$645 million and A$715 million in capex funded from existing cash and debt.
Jefferies analyst Michael Simotas said:
With significant uncertainty and volatility in lithium prices, it is unclear whether Wesfarmers will generate an acceptable return on its circa A$3 billion total project investment.
But the expansion plan carries less operating risk given it won't expand refinery capacity and the first concentrator has been successful.
The broker has a 12-month price target of $73, implying an 18% downside from here.
Challenger Ltd (ASX: CGF)
The Challenger share price is $9.74, down 3.6% today and up 19% over 12 months.
UBS downgraded the ASX 200 financial share to a hold rating yesterday.
The broker raised its price target slightly to $11.30.
This implies a potential 16% upside ahead.
Nick Scali Ltd (ASX: NCK)
The Nick Scali share price is $16.14, down 1.3% today and down 16% over 12 months.
Ord Minnett downgraded the ASX 200 consumer discretionary share from hold to lighten.
The broker said:
In its dominant Australian market, changes to negative gearing and the taxation of capital gains in the May federal budget drove a slump in auction clearance rates and caused housing prices to stumble.
These factors point to reduced housing turnover, a key factor in discretionary purchases of goods such as furniture.
The broker lowered its target price on Nick Scali shares to $14 from $15.
This suggests a potential 13% downside over the next year.
Xero Ltd (ASX: XRO)
The Xero share price is $70.92, up 0.6% today and down 61% over 12 months.
RBC Capital downgraded the market's biggest ASX 200 tech share to a hold rating on Monday.
The broker slashed its 12-month price target from $130 to $85.
This still implies a healthy potential 20% upside ahead.
Karoon Energy Ltd (ASX: KAR)
The Karoon Energy share price is $1.75, down 0.6% today and down 8% over 12 months.
Morgans downgraded the ASX 200 energy share from a buy to a hold call this week.
The broker shaved its price target from $1.77 to $1.75, implying the stock is already fully valued.
Morgans said:
KAR's June quarter delivered what we argued for when we upgraded a month ago.
Bauna is repaired and running at ~22,000 bopd, the heavy intervention spend is sunk, and we have 2H26 swinging to ~US$100m of free cash flow, a ~US$220m turnaround on the first half.
The problem is the share price got there first. KAR has added 20% since we wrote on 29 June, closing almost all of the gap to our valuation, while the portfolio risk has migrated from Brazil to the Gulf of Mexico.
At a price of A$1.71, vs a A$1.75 target, we see the value opportunity as having largely closed.
Sandfire Resources Ltd (ASX: SFR)
The Sandfire Resources share price is $18.81, up 1% today and up 69% over 12 months.
JP Morgan downgraded the ASX 200 copper share to a hold rating this week.
The broker has a 12-month price target of $19.
This indicates a potential rise of only 1% over the next year.
