In this article, we will discuss the 10 stocks recently downgraded by analysts. If you want to see more such stocks on the list, you can directly visit Analysts Are Downgrading These 5 Stocks.
The US equity futures market exhibits little movement in all three indices (S&P, Dow, and Nasdaq) as of April 21. Meanwhile, the key Eurozone indices are experiencing a slight uptick of around 10 basis points, with notable outperformance in the luxury, insurance, media, healthcare, energy, and utilities sectors. In contrast, basic resources, banks, retail, chemicals, and industrials are struggling. Basic resource stocks are taking a hit, with Rio Tinto, BHP, Anglo America, ArcelorMittal, and other major players experiencing a sharp decline of over 2%.
The Fed tends to focus on its feet when evaluating economic strategies, and due to the absence of significant information before the May gathering, it appears more probable that an increase of 25 basis points will occur next month (Williams and Mester both hinted at another rate hike arriving on May 3). However, Powell’s two primary indicators (employment and prices) are progressing in the intended direction at a hastened pace, implying that the US monetary policy will soon reach a more relaxed point, probably around a year-end Funds Rate estimate of 4.5-4.6%. In the most recent week, there was a minor uptick in borrowing at the Discount Window and the Bank Term Funding Program (BTFP).
The trend of declining inflation briefly halted during January and February. Still, it picked up again in March, and it appears to be gaining momentum in April (as demonstrated by the price-related elements of the Empire and Philadelphia reports). In other news related to rising prices, a recent article by Reuters advised major consumer goods companies to exercise caution in implementing price increases, as investors are concerned that they may lose market share to more affordable competitors.
Overall, the S&P 500 Index constituents is expected to report a 5-6% decline in first quarter earnings. That’s not a big number at all which is why the S&P 500 Index has been unexpectedly resilient so far this year. According to Factset, analysts are actually projecting an earnings growth of 0.9% for the calendar year 2023 and the S&P 500 Index currently has a forward PE ratio of around 18. Obviously, some companies will be negatively impacted by the Fed’s interest rates policies and the macroeconomic developments in the market. In this article we will take a look at 10 stocks analysts are downgrading right now. For a list of recent analyst upgrades, please visit 10 Stocks Analysts are Upgrading.
Citizens Financial Group, Inc. (NYSE:CFG), Bath & Body Works, Inc. (NYSE:BBWI), and Tesla, Inc. (NASDAQ:TSLA) were among the notable stocks that were recently downgraded by analysts. Citizens Financial Group, Inc. (NYSE:CFG) was downgraded due to the company’s updated FY23 NII guidance, which failed to meet expectations, while ratings for Bath & Body Works, Inc. (NYSE:BBWI) were cut due to ongoing margin pressures. Check out the complete article to see the details of these downgrades.
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10. CubeSmart (NYSE:CUBE)
Number of Hedge Fund Holders: 21
The self-storage industry has proven to be resilient regardless of economic conditions and is benefiting from the trend of decreasing home sizes. Americans tend to accumulate more possessions over time, which leads to continued demand for self-storage facilities. This industry has low barriers to entry and is dominated by a few large players, including CubeSmart (NYSE:CUBE). CubeSmart (NYSE:CUBE) primarily operates in high-quality and established markets, with a significant portion of its income coming from the top 25 markets in the US. The company also targets densely populated areas with an average population of almost 200K within a 3-mile radius.
On April 20, Keegan Carl, an analyst at Wolfe Research, downgraded CubeSmart (NYSE:CUBE) rating from Outperform to Peer Perform, without providing a specific price target. According to the analyst, the reason for the downgrade is the stock’s valuation. However, the analyst has stated that the long-term outlook for CubeSmart (NYSE:CUBE) is still positive.
09. Tripadvisor, Inc. (NASDAQ:TRIP)
Number of Hedge Fund Holders: 31
Tripadvisor, Inc. (NASDAQ:TRIP) has experienced robust revenue growth, particularly in its Viator segment. Nevertheless, increasing expenses have been creating difficulties for the company’s earnings. Analysts anticipate that the stock’s growth may be limited in the near to mid-term.
According to Truist’s analyst Patrick Scholes, Tripadvisor, Inc. (NASDAQ:TRIP) earnings forecast for 2023, 2024, and 2025 has been revised downwards. The largest reduction in the estimate was for 2024, and due to limited visibility in the industry, no forecasts were given beyond 2025. Consequently, on April 20, the analyst downgraded Tripadvisor, Inc. (NASDAQ:TRIP) rating from Buy to Hold, and the stock’s price target was cut from $40 to $21.
08. Acadia Healthcare Company, Inc. (NASDAQ:ACHC)
Number of Hedge Fund Holders: 32
On April 20, Acadia Healthcare Company, Inc. (NASDAQ:ACHC) was downgraded to Sell from Hold by Pito Chickering, a Deutsche Bank analyst, with a new price target of $63, down from $75. The analyst worries that the CTC business’s methadone clinics could move from a 10% growth category to a slower-growing sector or even become a headwind due to a decline in opioid patients. While the firm holds the management of Acadia Healthcare Company, Inc. (NASDAQ:ACHC) in high regard and is uncertain about the timing of the negative drivers, it believes investors should consider the short-term risks from Medicaid redetermination and the longer-term risk from the MAT Act’s drag on the CTC business when assessing Acadia Healthcare Company, Inc. (NASDAQ:ACHC).
07. NetApp, Inc. (NASDAQ:NTAP)
Number of Hedge Fund Holders: 32
NetApp, Inc. (NASDAQ:NTAP) provides IT storage solutions that offer software to help companies manage, safeguard, and optimize their data stored in cloud resources. Although the company is operating in a fast-growing industry, it seems to be struggling to progress. Even though NetApp, Inc. (NASDAQ:NTAP) is returning more than 100% of its free cash flow to shareholders, its revenue is shrinking, which may cause its stock multiple to decrease over time. Although the company’s strong balance sheet and commitment to returning free cash flow to investors are appealing, it is not meeting expectations. As a result, its stock multiple, such as P/E, could decrease going forward.
NetApp, Inc. (NASDAQ:NTAP) has been downgraded to Underperform from Neutral on April 20 by BofA analyst Wamsi Mohan, who has set a new price target of $58, down from $70. The analyst believes a weaker demand environment will hinder product revenue growth in FY24, although there will be some benefit to gross margins. However, due to reduced revenue, negative leverage is also expected. Furthermore, the firm argues that a slowdown in the public cloud will create a headwind through FY24.
06. F5, Inc. (NASDAQ:FFIV)
Number of Hedge Fund Holders: 33
F5, Inc. (NASDAQ:FFIV) has experienced a 30% drop in its share price due to a pessimistic industry outlook, exacerbated by persistent supply chain challenges. The company’s balance sheet remains healthy, although some weaknesses have been revealed. Management has acknowledged that the sector will face headwinds that will impede revenue growth, coupled with economic uncertainties. Analysts doubt the company’s high P/E ratio, recommending that investors exercise patience in a challenging environment that may result in further share price declines.
The tech industry experienced significant growth during the pandemic as companies scrambled to adapt to remote working environments. This trend is expected to continue with the rise of hybrid working arrangements. However, the supply chain issues and uncertainties caused by the pandemic are still prevalent in 2023, casting a shadow over the industry’s prospects. Despite these challenges, F5, Inc. (NASDAQ:FFIV) liquidity remains robust, with a sizable cash reserve of $605 million and no outstanding debt. This financial position is desirable in the turbulent economic climate that many predict, although the timing and severity of any potential downturn remain uncertain.
On April 20, F5, Inc. (NASDAQ:FFIV) was downgraded from Overweight to Equal Weight by Barclays, with a new price target of $140, down from $166. Although the company’s overall results for the March quarter were in line, there were significant shortfalls in the software segment, according to the analyst’s research note to investors. Due to F5, Inc. (NASDAQ:FFIV) inconsistent software segment and inadequate growth, the firm sees no potential upside for the shares and has downgraded its rating while also reducing its estimates.
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Disclosure. None. Analysts Are Downgrading These 10 Stocks is originally published on Insider Monkey.
