The latest ASX stocks hit by broker downgrades today

The ASX 200 is jumping for the 5th straight session but not all stocks are partaking in the merrymaking as they got hit by broker downgrades.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The S&P/ASX 200 Index (Index:^AXJO) is on track to post its fifth straight session of gains, but not all stocks are partaking in the merrymaking!

The top 200 stock benchmark added 0.2% in morning trade as the reopening of the global economy is emboldening the bulls.

This is despite the fact that the number of new daily COVID-19 cases worldwide hit another record high of 106,000 cases on Wednesday.

At risk of sounding like a coronavirus wet blanket, I should point out that not all ASX shares are having a good time. Here are two that are slumping today after top brokers downgraded their recommendation on these ASX stocks.

fall, take hit, punch, boxing, fortescue share price

Can't cut your way to growth

One laggard is the TechnologyOne Ltd (ASX: TNE) share price, which dropped 1.8% to $9.63 at the time of writing.

Its underperformance may have something to do with UBS urging investors to cut and run even though management delivered a good first half profit result.

But good isn't good enough in the broker's book. Management's guidance on Software as a Service (SaaS) annual recurring revenue of $133 million for FY20 may be a solid 31% increase over last year, but it's well below UBS' forecast of $164 million.

"We forecast 2H20E non-R&D/SaaS opex will need to reduce 10% yoy (ex-AASB16 impacts) to hit the bottom end of the guidance range (8% PBT growth) with a 14% reduction required to hit the top end (12% PBT growth)," said the broker.

"COVID-19 impacts will likely contribute to this from reduced travel and marketing expenditure. A significant step up in incremental SaaS ARR is also required (+$25m hoh) as well as $18m in 2H20 Initial Licence Fees."

UBS downgraded the stock to "sell" from "neutral" with a price target of $8.20 a share.

Knocked down

Another stock in the doldrums today is the Fletcher Building Limited (ASX: FBU) share price. The New Zealand-based building supplies group dropped 2.8% to $3 after Citigroup cut its rating on the stock to "neutral" from "buy" following management's latest update.

"Fletcher Building's skew to NZ and exposure to residential construction has led to very weak recent sales trends," said the broker.

"While sales improved in May 2020, they are still down 10%-20% on budget. Fletcher Building's own forecasts indicate that construction activity will drop much further in FY21e."

Infrastructure construction is the only bright spot on the horizon for the group, but it only contributes to around a quarter of Fletcher's total sales.

The timing of the aggressive shutdown of the NZ economy to contain COVID-19 also couldn't come at a worse time. Citi noted that the quarter typically makes up 40% to 45% of the group's full year earnings.

The broker's price target on the stock is NZ$3.50 a share.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

More on Share Fallers

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Share Fallers

Why Bank of Queensland, Brainchip, Pilbara Minerals, and Yancoal shares are sinking today

These ASX shares are being hammered on Tuesday.

Read more »

a middle-aged woman holds up two fingers with a wide mouthed smile on her face and wide open eyes.
Share Fallers

'Top quality': Expert picks 2 ASX 200 shares to buy at a nice discount

These stocks are down but not out. One portfolio manager is convinced they'll make you richer in the long run.

Read more »

a group of business people sit dejectedly around a table, each expressing desolation, sadness and disappointment by holding their head in their hands, casting their gazes down and looking very glum.
Share Fallers

Why Atlantic Lithium, Arafura, Brainchip, and Core Lithium shares are falling

These ASX shares are starting the week in the red.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Atlantic Lithium, CBA, Piedmont Lithium, and Pilbara Minerals shares are dropping

These ASX shares are ending the week deep in the red.

Read more »

Woman looking at her smartphone and analysing share price.
Share Fallers

Golden buying opportunity for 2 ASX shares slashed last month: Celeste

Here's a pair of businesses that are going pretty strong but whose stock prices are in a dip, ready now…

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why 29Metals, BHP, Helia, and Rio Tinto shares are dropping today

Here's why these ASX shares are weighing on the market's performance on Thursday.

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

Why Nuix, Smartgroup, Ventia, and Woodside shares are dropping today

These ASX shares are having a tough time on the ASX boards on Wednesday.

Read more »

A woman looks distressed as she stares dramatically at her phone
Share Fallers

Why Brainchip, Lynas, Megaport, and Universal Store shares are dropping today

These ASX shares are having a tough time on Tuesday.

Read more »