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. Eaton Corporation plc (NYSE:ETN)
Number of Hedge Fund Holders: 55
Eaton Corporation plc (NYSE:ETN) is a power management company with a rich history of over 100 years. The company is headquartered in Dublin, Ireland. On July 11, Wolfe Research analyst Nigel Coe decided to downgrade Eaton Corp (NYSE:ETN) from an Outperform rating to a Peer Perform rating. This change indicates a shift in Coe’s perception of the company’s performance and prospects, suggesting that he no longer considers it an outperforming stock compared to its peers.
ClearBridge Large Cap Growth Strategy made the following comment about Eaton Corporation plc (NYSE:ETN) in its Q4 2022 investor letter:
“Also within the secular category, our asset-light industrials names have flexed their strength through the bear market. Eaton Corporation plc (NYSE:ETN) is positioned in the sweet spot of several secular trends: two-way electricity solutions, microgrids and charging infrastructure for electric vehicles. While the company’s housing business is susceptible to near-term weakness, we believe Eaton can grow revenues in the mid-to-high single digits for several decades as its core utility customers have the rate base to cover ongoing electric infrastructure upgrades and buildouts.”
04. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Holders: 66
Teck Resources Limited (NYSE:TECK) is a Canadian company that explores, acquires, develops, and produces natural resources across Asia, Europe, and North America. Its operations are divided into segments: Steelmaking Coal, Copper, Zinc, and Energy. The company’s main products include copper, zinc, steelmaking coal, and blended bitumen. It also produces lead, silver, molybdenum, specialty metals, chemicals, fertilizers, and explores for gold. Established in 1913 as Teck Cominco Limited, the company changed its name to Teck Resources Limited (NYSE:TECK) in April 2009. It is headquartered in Vancouver, Canada.
On July 11, Timna Tanners, an analyst at Wolfe Research, downgraded Teck Resources Limited (NYSE:TECK) from an Outperform rating to a Peer Perform rating. This shift in the rating indicates a change in Tanners’ outlook for the company. The downgrade is primarily driven by revised forecasts for copper, zinc, and metallurgical coal, which have been adjusted downwards. As a result, Tanners now sees Teck Resources Limited (NYSE:TECK) as performing more in line with its industry peers rather than outperforming them.
03. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 69
On July 10, Societe Generale analyst Andrew Lim downgraded The Goldman Sachs Group, Inc. (NYSE:GS) from a Buy rating to a Hold rating. The downgrade comes ahead of the anticipated publication of the Basel 4 rules in the upcoming weeks. These rules have the potential to impose substantially higher capital requirements on banks, which has led to the downgrade decision by Societe Generale. All 23 banks successfully met the minimum capital requirements in the Federal Reserve’s 2023 stress tests. This accomplishment can be attributed to increased net interest income compared to the previous year. However, analyst Andrew Lim expressed concerns about upcoming B4 regulations that aim to enforce stronger capital requirements for large banks in response to recent bank failures. Lim’s analysis suggests that these regulations, which include operational risk and inflation in risk-weighted assets, may outweigh any potential reductions in credit risk-weighted assets. Specifically, Citigroup Inc. (NYSE:C) and The Goldman Sachs Group, Inc. (NYSE:GS) could face more significant challenges in meeting the heightened capital requirements compared to their peers.
02. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 79
Citigroup Inc. (NYSE:C) is an American investment banking company that provides services to over 200 million customers. On July 10, Societe Generale’s analyst, Andrew Lim, made the decision to downgrade Citigroup Inc. (NYSE:C) from a Buy rating to a Hold rating. As a result of this downgrade, Lim has also adjusted the price target for Citigroup Inc. (NYSE:C) to $50. The change in rating suggests that Lim no longer views Citigroup Inc. (NYSE:C) as a stock with significant upside potential. This decision was made in anticipation of the forthcoming publication of the Basel 4 rules, which are expected to introduce significantly stricter capital requirements for banks. The potential impact of these rules on the banks’ capital positions has prompted Societe Generale’s downgrade.
01. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 128
Activision Blizzard, Inc. (NASDAQ:ATVI) is an American video game holding company that develops, publishes, and distributes a wide range of popular video games. The company operates in various segments of the gaming industry, including console gaming, PC gaming, and mobile gaming. On July 11, Stifel analyst Drew Crum adjusted the rating of Activision Blizzard, Inc. (NASDAQ:ATVI) from Buy to Hold. The price target has also been raised from $88 to $95.
Kinsman Oak Capital Partners made the following comment about Activision Blizzard, Inc. (NASDAQ:ATVI) in its first quarter 2023 investor letter:
“We closed our long position in Activision Blizzard, Inc. (NASDAQ:ATVI) on the last trading day of the quarter. We initiated the position in November 2021 and, despite crystalizing a gain on the investment, we are admittedly a little frustrated with how this has played out. In January 2022, Microsoft (MSFT) agreed to acquire the company for $95/share, but regulators are determined to block the transaction, and appear increasingly activist, in our opinion.”
Disclosure: None. You can also take a look at 10 Dirt Cheap Stocks To Buy and 13 Best Basic Materials Stocks to Buy Now.
