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. DISH Network Corporation (NASDAQ:DISH)
Number of Hedge Fund Holders: 35
DISH Network Corporation (NASDAQ:DISH) is a company that provides pay-TV services to customers. They also operate a streaming platform called Sling TV. However, in 2023, DISH Network Corp. (NASDAQ:DISH) has experienced a challenging period, with its stock value decreasing by approximately 50% year to date. The decline can be attributed to concerns about losing subscribers and facing increasing competition in the industry. Despite these challenges, optimistic views suggest that DISH Network Corp. (NASDAQ:DISH) has the potential for long-term growth.
On June 5, Benchmark downgraded DISH Network Corporation (NASDAQ:DISH) from a Buy to a Hold rating and removed their previous price target of $37 on the company’s shares. The recent stock movement, triggered by media reports suggesting a partnership between DISH Network Corp. (NASDAQ:DISH) and Amazon to provide wireless services to Prime customers at low or no cost, is seen by Benchmark as an indication of Dish’s network potential. However, the firm remains skeptical about any immediate initiatives, even prior to denials from Amazon and major mobile network operators (MNOs). The previous price target and fair valuation estimation had considered a 5G O-RAN network model until 2031, and the analyst believes that a fair value in the mid to high $30s is still plausible, considering the recovery of DISH Network Corporation (NASDAQ:DISH) substantial investment of over $30 billion in the spectrum.
04. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE:DG) is a discount retailer in the United States. The company is headquartered in Goodlettsville, Tennessee. Discount retailers like Dollar General Corporation (NYSE:DG) tend to perform well during economic downturns when consumers are looking to reduce expenses. However, On June 6, Dollar General Corporation (NYSE:DG) was downgraded by Wells Fargo analyst Edward Kelly from Overweight to Equal Weight, with a lowered price target of $165 compared to the previous target of $178.
The downgrade comes following meetings with Dollar General Corporation (NYSE:DG) management. While the company attempted to deliver a reassuring message, Wells Fargo expressed concerns that Dollar General Corporation (NYSE:DG) is facing underlying challenges that require an investment cycle to rectify. The analyst notes that a return to its previous growth trajectory is unlikely in the near term. The firm highlights management departures, execution issues that deviate from the company’s typical performance, evidence of some loss in market share, price increases, increased labor costs, reduced shelf growth, and a temporary suspension of share repurchases as factors of concern. Wells Fargo believes that Dollar General Corporation (NYSE:DG) issues extend beyond macroeconomic factors and include some transitory operational challenges.
03. The Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Holders: 59
The Estée Lauder Companies Inc. (NYSE:EL) is a global corporation specializing in manufacturing, marketing, and selling various beauty and personal care products. Their product portfolio includes skincare items, makeup, fragrances, and hair care products. The company operates on a worldwide scale, catering to customers across different countries. On June 5, The Estée Lauder Companies Inc. (NYSE:EL) was downgraded by Oppenheimer from Outperform to Perform without a specified price target.
The downgrade is a result of several factors, including the company’s report in early May, recent developments in the consumer and beauty sectors, and a decline in the company’s stock price. Oppenheimer views the risk/reward scenario for The Estée Lauder Companies Inc. (NYSE:EL) as less favorable. The analyst has revised their forecasts downward, further deviating from consensus estimates, making it difficult to envision the shares outperforming at current levels. Oppenheimer points to aggressive Street estimates, a premium valuation compared to The Estée Lauder Companies Inc. (NYSE:EL) historical performance, and the potential for conservative guidance from management in August as reasons for the downgrade. The firm highlights that Estee Lauder is no longer a “beat and raise” story as it has been in the past, indicating increased risk to the company’s premium valuation multiple.
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.”
02. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 78
Wells Fargo & Co (NYSE:WFC) offers various financial services, including banking, investment, mortgage, and consumer/commercial finance, to clients. On June 7, Odeon Capital analyst Dick Bove revised their recommendation for Wells Fargo & Company (NYSE:WFC) from “Buy” to “Hold” and has set a price target of $44.60 for the stock.
In its 2022 annual investor letter, Davis New York Venture Fund provided the following statement regarding Wells Fargo & Company (NYSE:WFC):
“Our investment thesis for our next largest bank investment, Wells Fargo, is totally different. As is well known, Wells Fargo & Company (NYSE:WFC) is the country’s third-largest bank, serving one in three US households. Years of regulatory missteps under prior managements resulted in reputational damage, higher-than-average expenses, numerous consent orders, caps on asset growth, all added to the negative impact of low rates on their interest income. However, where others see bad news, we see resiliency and gradual improvement. Wells Fargo’s resiliency is reflected in the fact that despite years of terrible headlines and congressional hearings, Wells Fargo’s core customers stayed put and customer attrition remains extraordinarily low.
As to gradual improvement, new management has made steady headway in closing consent orders, settling regulatory matters, and upgrading systems. Thus, rather than increasing profits from growth, Wells Fargo’s earnings growth for the next three-to-five years should come from the combined tailwinds of rising interest income, partially offset by normalizing credit costs, reduced expenses as systems improve, and the scandals of the last decade are gradually put behind them, and the return of excess capital through share repurchases and rising dividends. The hypothetical earnings bridge displayed in Figure 6 gives some sense of the earnings power we see unfolding for this durable financial franchise in the years ahead.
While our grounded optimism carries the day, we are mindful of the risk that Wells Fargo’s historically excellent credit culture may have deteriorated or that exasperated regulators may choose to extract even more major penalties for past infractions.”
01. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
DA Davidson analyst Tom Forte, on June 5, downgraded Apple Inc. (NASDAQ:AAPL) from Buy to Neutral on June 5 and set a price target of $185, down from $193. The reason behind the downgrade is Apple Inc. (NASDAQ:AAPL) recent announcement of its forthcoming augmented reality/virtual reality (AR/VR) headset called Vision Pro. According to the analyst, the launch of this new hardware product, slated for 2024 with a price tag of $3,499, is significant and could be Apple’s most important since the introduction of the iPhone in 2007. However, DA Davidson believes that the positive impact of the AR/VR product launch is already factored into the share price, leading to the downgrade. The firm also points out that Apple Inc. (NASDAQ:AAPL) faces notable challenges in consumer adoption of AR/VR hardware, which could limit its immediate impact on sales and profitability.
Silver Ring Value Partners made the following comment about Apple Inc. (NASDAQ:AAPL) in its Q1 2023 investor letter:
“Exited the Apple Inc. (NASDAQ:AAPL) put options position, as I came to the conclusion that I was wrong about the degree to which the stock is overvalued. While I still believe it’s optimistically priced, the fundamentals over the last few years made me believe that my initial decision to buy the put options was wrong.”
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