In this article, we will take a look at the 10 stocks that were recently downgraded by analysts. If you want to see some other stocks receiving downgrades, go directly to Analysts Just Turned Bearish on These 10 Stocks.
Notable companies from the industrials and technology sectors, including United Airlines Holdings, Inc. (NASDAQ:UAL), Union Pacific Corporation (NYSE:UNP) and VMware, Inc. (NYSE:VMW), recently received downgrades from analysts.
In addition, analysts also lowered their ratings for spices and flavored products maker McCormick & Company, Incorporated (NYSE:MKC) and Arkansas-based bank holding company Bank OZK (NASDAQ:OZK). We will discuss the reasons behind these downgrades in the remaining article.
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Analysts Just Turned Bearish on These 10 Stocks
10. Azul S.A. (NYSE:AZUL)
Number of Hedge Fund Holders: 10
Shares of Azul S.A. (NYSE:AZUL) fell over six percent on Wednesday, July 6, 2022, after Barclays downgraded the Brazil airline from “Equal-Weight” to “Underweight,” citing elevated fuel prices.
Moreover, Barclays analyst Pablo Monsivais thinks Azul S.A. (NYSE:AZUL) would likely face more difficulties as it seeks external financing while the interest rates are climbing. Monsivais also cut his price target for Azul S.A. (NYSE:AZUL) from $17 per share to $7 per share.
Azul S.A. (NYSE:AZUL) also received a price-target cut from Raymond James on Thursday, July 7, 2022. The research firm slashed its price target for Azul S.A. (NYSE:AZUL) from $22 per share to $12 per share, citing a higher fuel price outlook.
9. Southern Copper Corporation (NYSE:SCCO)
Number of Hedge Fund Holders: 16
Wolfe Research lowered its ratings for Southern Copper Corporation (NYSE:SCCO) from “Peer Perform” to “Underperform” on Thursday, July 7, 2022, citing dropping commodity prices.
Wolfe Research analyst Timna Tanners trimmed the commodity price outlook amid lower demand from China. Tanners also anticipate limited near-term growth for Southern Copper Corporation (NYSE:SCCO). She cut her price target for Southern Copper Corporation (NYSE:SCCO) from $62 per share to $47 per share.
8. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 19
Barclays downgraded SAP SE (NYSE:SAP) from “Overweight” to “Equal Weight” on Wednesday, July 6, 2022. Barclays analyst Raimo Lenschow argued that the consensus estimate doesn’t reflect the company’s suspension of services in Russia. Lenschow also expressed concerns over the full-year outlook of SAP SE (NYSE:SAP) and the upcoming departure of its CFO.
Earlier this year, SAP SE (NYSE:SAP) announced that its CFO Luka Mucic would leave the company in March 2023. The company is currently searching for a successor but hasn’t found one so far.
Separately, investment management firm Polen Capital also talked about SAP SE (NYSE:SAP) in its first-quarter 2022 investor letter, stating:
“In our opinion, SAP is demonstrating that their cloud transition and RISE with SAP strategy are working. We added to our position upon evidence that CEO Christian Klein’s strategy is bearing fruit, and the stock trading down to an attractive valuation during the quarter. The strategy and sell-off are connected, and we believe it provided an opportunity for long- term shareholders. The company recently reported weak 2022 margin and FCF guidance. This was expected if cloud growth accelerated – which it has. Current cloud backlog has accelerated to a mid-20% growth rate, and the S/4 HANA Cloud Backlog and Cloud Sales have accelerated as well. Cloud, which tends to be a very sticky business with high recurring revenue, is now a >$10bn business and represents roughly 40% of sales.
Our research shows this should only increase over the next five years. If management continues to successfully execute its strategy, the transition should create a mechanical lift to margins and greater levels of FCF. We believe SAP is a durable business led by capable management that is poised to deliver high-quality mid-teens earnings growth over the next five years.”
7. Kellogg Company (NYSE:K)
Number of Hedge Fund Holders: 22
UBS cut its ratings for Kellogg Company (NYSE:K) from “Buy” to “Neutral” on Thursday, July 7, 2022. UBS analyst Cody Ross thinks that Kellogg Company (NYSE:K) will face a sharp rise in inflation in the coming months.
Ross added that it would be hard for Kellogg Company (NYSE:K) to pass on all of that inflation to customers in the form of price hikes. He also cut his price target for the Michigan-based food manufacturer from $81 per share to $74 per share.
Like Kellogg Company (NYSE:K), analysts also turned bearish on United Airlines Holdings, Inc. (NASDAQ:UAL), Union Pacific Corporation (NYSE:UNP) and VMware, Inc. (NYSE:VMW).
6. Aspen Technology, Inc. (NASDAQ:AZPN)
Number of Hedge Fund Holders: 22
Aspen Technology, Inc. (NASDAQ:AZPN) received a downgrade from Baird on Thursday, July 7, 2022. The research firm slashed its ratings for the software company from “Outperform” to “Neutral.”
Baird analyst Rob Oliver thinks that the potential near-term challenges would restrict the upward movement of Aspen shares. Oliver also expressed worries over the company’s fiscal 2022 and fiscal 2023 financial guidance. He cut his price target for Aspen Technology, Inc. (NASDAQ:AZPN) from $170 per share to $162 per share.
Earlier this year, Aspen Technology, Inc. (NASDAQ:AZPN) appeared in the first-quarter 2022 investor letter of investment management firm Polen Capital. Here’s what the firm said:
“Asset optimization software company Aspen Technology is one of our long-time holdings. We anticipate growth in the business to accelerate as both customer demand and business conditions in many of the company’s key end markets continue to improve. The company had been previously challenged, in part, by weaker energy prices and the impact of the pandemic. Still, we believe the strategic imperative for its customers to operate assets more efficiently and sustainably remains intact.”
Click to continue reading and see Analysts Just Turned Bearish on These 5 Stocks.
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Disclosure: None. Analysts Just Turned Bearish on These 10 Stocks is originally published on Insider Monkey.
