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.
Global markets experienced a risk-on sentiment on July 13, leading to the US dollar falling to its lowest level in 15 months. Stocks worldwide received a boost from softer US inflation data. The positive market sentiment continued for another day, as U.S. futures rose and the value of the dollar dropped to its lowest point in 15 months, reported Bloomberg. European stocks maintained their gains from the previous day’s rally, with the Stoxx 600 Index surging by 1.5%. Swatch Group AG, known for producing Omega and Longines watches, experienced a nearly 6% increase in its stock value, benefiting from China’s reopening and resulting in higher profits. Watches of Switzerland Group Plc, the leading retailer of Rolex watches in the UK, saw a remarkable surge of 10% in its stock price. According to economist Steve Hanke, the United States no longer faces an inflation problem. Hanke, a seasoned economist, and professor of applied economics at Johns Hopkins University, explained that the contraction of the money supply by minus 4% on a year-over-year basis in the United States is a significant factor contributing to this viewpoint. Speaking on CNBC’s “Street Signs Asia,” Hanke emphasized that such a decline in the money supply has not been witnessed since 1938. He further highlighted the relationship between changes in money supply and their impact on the price index and inflation. Based on these observations, Hanke asserts that the era of inflation concerns has concluded for the United States.
China’s National Council for Social Security Fund, a prominent state-run investor, has raised concerns about the increasing debt risks faced by cash-strapped developers and local government financing vehicles (LGFVs) in China. The fund overseeing assets worth around $417 billion has reportedly instructed its asset managers to divest certain bonds from their portfolios. These bonds include those issued by riskier LGFVs and private developers, as identified during a thorough review conducted by the fund, reported Bloomberg. Although the individuals providing this information requested to remain anonymous due to the sensitive nature of the topic, they revealed that bonds specifically linked to LGFVs in Tianjin, a heavily indebted northern port city, were highlighted as particularly problematic. This move by the National Council for Social Security Fund adds to the growing chorus of warnings regarding the potential risks associated with China’s real estate sector and local government financing.
According to Reuters, Gold prices reached a nearly one-month high on July 13, driven by a weaker U.S. dollar, following the release of U.S. inflation data that sparked hopes of a potential halt to the Federal Reserve’s tightening of monetary policy. At 06:58 GMT on July 13, spot gold increased by 0.3% to $1,962.11 per ounce, reaching its highest since June 16. U.S. gold futures also saw a gain of 0.2% to $1,965.80. U.S. consumer prices experienced modest growth in June, marking the smallest annual increase over two years. However, this continued trend of subsiding inflation might not be sufficient to dissuade the Federal Reserve from resuming interest rate hikes later in the month.
On the stocks market front, notable stocks such as The Goldman Sachs Group, Inc. (NYSE:GS), Citigroup Inc. (NYSE:C) and Activision Blizzard, Inc. (NASDAQ:ATVI) were downgraded by analysts, among many others. Check out the complete article to see some other stocks recently downgraded by analysts.
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10. Toyota Motor Corporation (NYSE:TM)
Number of Hedge Fund Holders: 7
Toyota Motor Corporation (NYSE:TM) is a Japan-based automotive manufacturer which was founded in 1937. Toyota Motor Corporation (NYSE:TM) owns notable brands such as Lexus, Ranz, Hino, and Daihatsu. On July 10, Morgan Stanley downgraded Toyota Motor Corporation (NYSE:TM) rating from Overweight to Equal-weight while increasing the stock’s 12-month price target to ¥2,400 from ¥2,200. This adjustment reflects weaker currency assumptions and the impact of a depreciating yen against the U.S. dollar. The revision is part of a profit prediction adjustment for Japanese automakers, considering the yen depreciation and revised price targets. The sector is recovering with improved chip supplies, strong sales in the U.S. market, and increasing incentives per vehicle. However, challenges arise in China due to the growing popularity of locally produced Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs), impacting sales volumes of Internal Combustion Engine (ICE) vehicles and Hybrid Electric Vehicles (HEVs). Morgan Stanley expects robust sales and operating profit in the first quarter but downgrades the rating due to diminished upside potential for next-generation BEVs.
09. XPO, Inc. (NYSE:XPO)
Number of Hedge Fund Holders: 30
XPO, Inc. (NYSE:XPO) is an American transportation and logistics company. On July 11, Jeffrey Kauffman, an analyst at Vertical Research, downgraded XPO, Inc. (NYSE:XPO) from a Buy to a Hold rating.
Alger Mid Cap Focus Fund made the following comment about XPO, Inc. (NYSE:XPO) in its Q4 2022 investor letter:
“XPO, Inc. (NYSE:XPO) is the fourth largest less-than-truckload (LTL) service provider in North America. Following its late October spin-off of RXO, Inc., which provides freight brokerage services and last mile logistics, XPO has become a solid pureplay LTL company. During the period, shares of XPO outperformed after the RXO spin-off transaction was consummated in late October and helped unlock the sum of parts value as the market was undervaluing both assets. Moreover, shares of most LTL companies rallied from October to mid-November as part of a broader rally in cyclical stocks.”
08. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Holders: 35
Pennsylvania-based Alcoa Corporation (NYSE:AA) is the world’s eighth biggest producer of aluminum. On July 11, Wolfe Research analyst Timna Tanners revised her evaluation of Alcoa Corporation (NYSE:AA) from a Peer Perform rating to an Underperform rating and has set a price target of $25. This development deals a significant setback to the company as it reflects apprehensions regarding its financial performance. Alcoa Corporation (NYSE:AA) recently released its fiscal results for the previous quarter, and they were disappointing, failing to meet analyst forecasts. The company’s earnings report for Q1 2023, published on April 19th, revealed concerning figures that fell below market expectations. Alcoa Corporation (NYSE:AA) reported earnings per share of $0.23, which was notably worse than analysts’ consensus estimate of $0.05, representing a deviation of $0.18. This discrepancy underscores a considerable disparity between actual performance and market predictions.
ClearBridge Investments made the following comment about Alcoa Corporation (NYSE:AA) in its Q3 2022 investor letter:
“We bought Alcoa Corporation (NYSE:AA), a leading aluminum producer, after the stock sold off over lower commodity prices. The current price of aluminum is unsustainably low, below its cost of production, despite inventories being at historic lows. We believe these depressed prices are due to the evaporation of Chinese demand resulting from its zero COVID-19 policy, but that it will likely recover over the next few quarters.
Additionally, Alcoa is leading the industry in reducing carbon emissions from its smelting process which is helping to improve its cost position relative to global competitors. Given its compelling valuation and strong free cash flow yield, we are confident in the company as it is increasingly relied upon to meet the growing structural demand from electrification and the global energy transition.”
07. VeriSign, Inc. (NASDAQ:VRSN)
Number of Hedge Fund Holders: 37
VeriSign, Inc. (NASDAQ:VRSN) is a U.S. based company located in Reston, Virginia. It specializes in managing a wide range of network infrastructure services, enabling businesses to maintain their servers, access domain names, and implement security applications. As of the first quarter of 2023, VeriSign, Inc. (NASDAQ:VRSN) recorded a total of 174.8 million domains in the .com/.net base. This figure represents an increase of 1 million domains compared to the same quarter of the previous year.
On July 11, Baird analysts lowered the company’s shares to Neutral and reduced the price target from $265 to $245. The downgrade was attributed to weaker domain growth trends, which have fallen below the guided range and may further reduce domain guidance for the year. Despite this, Baird still views VeriSign, Inc. (NASDAQ:VRSN) as a secure long-term investment. After a resilient start to the year, domain growth has flattened in the past six weeks, potentially due to factors such as weaker SMB sentiment, business starts, and lower contribution from China. The uncertainty surrounding .web is also a source of frustration. Over the past year, VeriSign, Inc. (NASDAQ:VRSN) shares have outperformed the S&P 500, rising approximately 24%, but year-to-date performance has been weaker, with a gain of around 7% compared to the S&P 500’s 16% increase.
06. Truist Financial Corporation (NYSE:TFC)
Number of Hedge Fund Holders: 48
Truist Financial Corporation (NYSE:TFC) is a banking company based in Charlotte, North Carolina. The company offers banking and trust services in the Southeastern and Mid-Atlantic US. On July 11, Truist Financial Corporation (NYSE:TFC) faced a downgrade by Jefferies analyst Ken Usdin, who shifted the rating from Buy to Hold. The price target has been revised downwards from $37 to $32.
Here is what Tweedy, Browne has to say about Truist Financial Corporation (NYSE:TFC) in its Q1 2023 investor letter:
“The Funds received very little in the way of return contributions from many of their financial, energy, media, and healthcare holdings. While it would appear that a crisis was avoided by the quick intervention of bank regulators in the US and Switzerland, some uneasiness still remains in the global banking community. This turmoil couldn’t help but have a negative impact on investor sentiment and in turn on Fund bank holdings such as Truist Financial Corporation (NYSE:TFC).”
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Disclosure: None. Analysts Are Downgrading These 10 Stocks is originally published on Insider Monkey.
