The S&P/ASX 200 Index (ASX: XJO) has been grinding higher recently and managed to reach a new, 7-month high last week. However, some popular ASX 200 shares are not getting the institutional love they want and have been hit with broker downgrades.
ASX 200 shares hit with downgrades 1. Woodside Petroleum Limited (ASX: WPL) Credit Suisse (SIX:CSGN) has lowered the Woodside Petroleum share price target from $25.20 to $24.70 but retains an outperform rating. The broker believes its capex and funding issues are not as imbalanced as the market is expecting.
This follows the recent stability in oil prices to around US$40 per barrel. However, a number of uncertainties continue to put downward pressure on the oil price. These include uncertainty surrounding when an effective COVID-19 vaccine will be available, whether consumer behaviour has changed for good regarding working from home, and the future policies of the OPEC group.
2. Zip Co Ltd (ASX: Z1P) Citigroup (NYSE:C) has lowered the Zip share price target from $6.70 to $6.55 which represents an approximate 10% discount to today’s price (at the time of writing). Citi also retains its sell rating. The broker is impressed with Zip’s recent trading update showing strong growth in merchant sales volumes and subscribers. However, it can’t ignore the downside risks due to increasing competition.
This follows the 30% increase in the Zip share price in October leading up to the company’s Q1 update. The record Q1 metrics failed to impress the market and the Zip share price was consequently sold off. Buy now, pay later (BNPL) shares appear to be in a constant cycle of ‘buy the rumour and sell the news’.
Contrary to this statement, today, Zip announced a new product feature that allows Zip Pay users to shop anywhere that accepts Visa (NYSE:V). Its share price has pushed up 1.67% to $7.29 at the time of writing.
3. Rio Tinto Limited (ASX: LON:RIO) Macquarie Group Ltd (ASX: MQG) has lowered its Rio Tinto share price target from $112 to $111. The group has retained its outperform rating but downgraded its forecast earnings by around 2% on the back of Rio’s September production report.
Iron ore prices recently hit a 6-year high of US$123 per tonne. This has been driven by China’s significant infrastructure stimulus to boost the country’s economic growth. China’s demand side consumption combined with supply side challenges from leading iron ore producing countries such as Brazil and India have buoyed commodity prices.
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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.
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