5 Stocks Losing Value Following Analyst Ratings Downgrades

2. Farfetch Limited (NYSE:FTCH)

Number of Hedge Fund Holders: 45

Shares of Farfetch Limited (NYSE:FTCH) plummeted over 11 percent on Tuesday, June 28, 2022, after UBS downgraded the online luxury fashion retail platform from “Buy” to “Neutral,” citing lower gross merchandise volume (GMV) growth.

In a research note to investors, UBS analyst Kunal Madhukar projected GMV growth of 1.7 percent for fiscal 2022, well below the Street estimates of 4 percent growth. Madhukar thinks that Farfetch Limited (NYSE:FTCH) may not be able to achieve GMV growth targets in certain regions due to a deteriorating macro-outlook. He also trimmed his price target for Farfetch Limited (NYSE:FTCH) from $13 per share to $10 per share.

Farfetch Limited (NYSE:FTCH) also recently appeared in the first-quarter 2022 investor letter of investment management firm Polen Capital. The firm said:

“We also initiated a position in global luxury fashion e-commerce marketplace Farfetch in the first quarter and took advantage of meaningful weakness in the company’s share price during the period. Farfetch previously had too large a market cap for the Portfolio, but it has since moved to a level where it’s appropriate to own it – both in this Portfolio and in our smid-cap strategy. The company’s fundamentals remain attractive as indicated by the compelling results Farfetch reported in February.

The company remains an early mover with “the world’s only truly global marketplace for luxury at scale”. Farfetch has broader reach around the world with a diversity of brands that is much larger than its competitors. Many of the items it sells are exclusive. Our research shows that its brand assortment, brand image, geographic breadth, an inventory-light business model, a more compelling offering for luxury partners, and artificial intelligence are all competitive edges for the company. We believe Farfetch is well-positioned for the continued market share shift from offline to online in this category. The personal luxury goods market has trailed other categories in online penetration, but consumer behaviors and preferences shifted as a result of the pandemic creating more comfort with purchasing goods like this online. Changed behavior and the general shift to a higher portion of Millennial and Gen Z luxury shoppers supports this continued shift as does the growth in emerging market demand.”