In this article, we discuss the 5 stocks receiving downgrades from analysts. If you want to see more such stocks on the list, go directly to Analysts Are Downgrading These 10 Stocks.
05. The Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Holders: 44
The Estée Lauder Companies Inc. (NYSE:EL) manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide. On May 12, Argus analyst John Staszak downgraded The Estée Lauder Companies Inc. (NYSE:EL) from Buy to Hold. The downgrade is primarily due to concerns about the slow recovery in China and the travel retail segment in Asia, where inventories are increasing. The analyst also highlights The Estée Lauder Companies Inc. (NYSE:EL) recent earnings miss and guidance reduction. As a result, Argus has revised its earnings per share (EPS) estimates for FY23 to $3.80 (down from $6.00) and for FY24 to $6.00 (down from $7.20). However, the firm mentions that if there is an earlier-than-expected recovery in China and the travel retail segment, it will reconsider adding the stock back to its Buy list.
ClearBridge All Cap Growth Strategy made the following comment about The Estée Lauder Companies Inc. (NYSE:EL) in its Q4 2022 investor letter:
“The Estée Lauder Companies Inc. (NYSE:EL), which manufactures and markets cosmetics, fragrances, skin and hair care products across a number of well-known global brands including Clinique, MAC and Bobbi Brown, adds to our group of secular growers. Estee Lauder is a global leader in the prestige beauty space, which has outgrown the broader home and personal care category since 2010 and has historically been recession resilient. The company has substantial brand and pricing power and is over indexed to the highly profitable prestige skin care category. We believe the company’s most recent earnings report and 2023 guidance update, which was cut significantly due to uncertainty over China’s zero-COVID policy (China and travel retail are key growth drivers), provided an attractive entry point. At this point, we believe the stock has been significantly derisked and could see potential upside from a China recovery.”
04. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 48
In a research note issued on May 12, Mizuho downgraded Twilio Inc. (NYSE:TWLO) from Buy to Neutral and adjusted the price target from $90 to $55. The analyst explains that Twilio Inc. (NYSE:TWLO) Q1 guidance, projecting a 4%-5% year-over-year revenue growth, fell significantly below the consensus estimate of 11%. This disparity is attributed to the challenging macroeconomic conditions and the ongoing impact of tough comparisons from the cryptocurrency sector, which are expected to continue exerting pressure on growth in the near term. Mizuho anticipates subdued growth for Twilio Inc. (NYSE:TWLO) in the near term and does not foresee any immediate catalysts that would drive the stock’s performance.
Aristotle Atlantic Focus Growth Strategy made the following comment about Twilio Inc. (NYSE:TWLO) in its Q4 2022 investor letter:
“We sold Twilio Inc. (NYSE:TWLO) and thereby reduced our subsector weight in software. The company reported a decent third quarter, but disappointed on fourth quarter 2022, full year 2023, and long-term guidance. The company is seeing macroeconomic headwinds and a slowdown spreading from technology, social media and cryptocurrency to retail and e-commerce. The other negative disclosure and a driver of this gross margin “miss” was that Twilio’s software sales are not accelerating at the rate that we expected. We are disappointed with this lower topline and low operating margin improvement guidance. The business transformation is taking longer than expected, and there is the heightened possibility that the new software growth could be stifled by more formidable competition as Twilio has made too many missteps.”
03. Brookfield Corporation (NYSE:BN)
Number of Hedge Fund Holders: 49
Keefe Bruyette analyst Michael Brown downgraded Brookfield Corporation (NYSE:BN) from Outperform to Market Perform on May 12 and adjusted the price target from $45 to $39. According to the analyst’s research note, although Brookfield Corporation (NYSE:BN) reported a beat in its recent quarter due to realized carried interest, the overall performance was relatively in line with expectations. The analyst expresses concerns about the early stages of real estate stress and believes that these concerns will continue to negatively impact the company’s shares. Keefe Bruyette does not anticipate any catalysts in the near term that would narrow the valuation gap between the stock and its net asset value. As a result, the firm expects the shares to remain range-bound.
02. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 99
The Walt Disney Company (NYSE:DIS) on May 10 reported a FQ2 non-GAAP EPS of $0.93, missing Wall Street estimates by $0.01. Revenue over the period increased 13.4% year-over-year to $21.82 billion, in-line with market consensus. The average monthly revenue generated per paid subscriber of Disney+ in the domestic market rose from $5.95 to $7.14, attributed to a surge in average retail pricing.
On May 12, Wolfe Research analyst Peter Supino downgraded Disney from Outperform to Peer Perform without providing a specific price target. In a research note, the analyst explains that the company’s outlook for direct-to-consumer subscribers and linear TV has deteriorated. The firm expresses skepticism regarding Disney’s plan to achieve higher subscriber numbers, implement price increases, and reduce costs, considering it contradictory. Wolfe Research further highlights concerns about the risky nature of Disney’s subscriber forecasts for Disney+ and the worsening outlook for linear TV. Additionally, the $2.5 billion in cost reductions that Disney aims to achieve are now included in consensus estimates.
01. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 115
PayPal Holdings, Inc. (NASDAQ:PYPL) is a payment platform provider enabling cross-border transactions for businesses and consumers. It is headquartered in San Jose, California. PayPal Holdings, Inc. (NASDAQ:PYPL) is another company facing the heat from inflation, as it revealed in February 2023 that consumer spending slowed down during last year’s fourth quarter. Exane BNP Paribas analyst Alexandre Faure downgraded PayPal from Outperform to Neutral on May 12.
Paypal Holdings, Inc. (NASDAQ:PYPL) was mentioned in the fourth-quarter 2022 investor letter of Renaissance Investment Management. Here is what it is:
“Another underperformer in the quarter was PayPal Holdings, Inc. (NASDAQ:PYPL). Despite reporting solid third quarter operating results and announcing new payment agreements with both Apple and Amazon.com, the company guided for a slowdown in e-commerce activity, partly reflecting weakened consumers who are dealing with heightened inflation. However, we still expect growth in PayPal’s core payments platforms to improve in upcoming quarters, driven by easier year-over-year comparisons.”
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