Now could be the time to sell the two ASX 200 stocks in this article.
That's the view of analysts at Goldman Sachs, which have slapped sell ratings on them this morning.
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Which ASX 200 stocks are sells?
The first stock that could be a sell is stock exchange operator ASX Ltd (ASX: ASX).
In response to its investor day update this week, the broker has reiterated its sell rating and $55.45 price target on its shares.
Based on its current share price of $58.14, this implies potential downside of 4.5% for investors over the next 12 months.
Commenting on the ASX 200 stock's investor day event, the broker said:
Elevated Capex to persist at ~$160-180m p.a. across FY25 to FY27 implying ~$510m cumulative spend (at midpoint) across that 3 year period on CHESS, derivatives & trading + maintenance capex. We note that while ASX's technology roadmap extends beyond FY27, ASX does guide to capex reducing into FY28. 2) D&A will continue to be a drag on earnings growth: ASX guidance implies ~$50m D&A charge in FY25. We think D&A will gradually increase in a staged manner based on ASX's guided capex spend and as system releases go live through FY25-FY28+ using a useful life of about 7-10 years. We now forecast a more material increase in D&A by FY30 (assuming all major projects go live before then).
Reece Ltd (ASX: REH)
Another ASX 200 stock that has copped a sell rating is Reece.
This morning, Goldman has initiated coverage on the plumbing parts company's shares with a sell rating and $23.35 price target. This implies potential downside of 12.1% for investors over the next 12 months.
The broker appears to believe the market is too optimistic on the company's US expansion and feels it will take time to have a meaningful impact. It explains:
US provides growth optionality…over time. Limited geographic spread and low network density in a fragmented market supports store roll out growth opportunity with margin expansion to complement market growth over time. However, assessing the network density of competitors like Ferguson and Watsco suggests this is a long-dated opportunity. We forecast a 7% 3yr EBITDA CAGR (USD) for this segment.
In light of this and with the ASX 200 stock trading on higher than normal multiples, the broker feels it is fully valued today. It adds:
REH is trading in excess of its historical average premium to the S&P ASX200 (0.6x standard deviations above its 5yr average). Compared to its peer set, REH is also trading above its historic premiums despite lagging the peer set on metrics such as EBIT margins and EBIT growth (note we forecast a 5% EBIT CAGR for REH, in line with Visible Alpha consensus). We initiate at Sell.
