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 on Wall Street Lower Ratings for These 5 Stocks.
In the realm of cautious trading before the quarter concludes, global stocks in Asia witnessed a mixed performance. As investors brace for the Federal Reserve’s upcoming release of crucial inflation data later this week, a sense of prudence prevails. Japan’s Finance Minister issued a cautionary note against excessive fluctuations in the yen, underscoring the sensitivity of currency markets amid uncertain economic conditions. In this landscape, Julius Baer discerns a trend of capital flowing into Japanese equities, marking a potential shift in investment patterns. This observation hints at evolving investor sentiments and strategic reallocations within the financial markets.
Looking ahead, all eyes are on the Federal Reserve’s forthcoming release of its key inflation gauge data, slated for Friday. This data release is expected to provide crucial insights into the trajectory of inflation, influencing market sentiment and potentially steering investor strategies in the days to come. As traders navigate through these uncertain waters, the cautious stance underscores the importance of strategic positioning and prudent risk management in the ever-fluctuating landscape of global financial markets.
In February, new home sales in the U.S. unexpectedly dropped by 0.3%, attributed to rising mortgage rates during the month. Despite this decline, the overall trend remains robust amidst a persistent shortage of existing homes in the market, reported Reuters. Notably, the median price of new homes recorded its lowest figure in over 2-1/2 years, while the supply reached its highest level since November 2022. Builders are responding to market dynamics by increasing construction efforts, offering price reductions, and adjusting floor plans to enhance affordability. This strategy seems to be stabilizing housing activity, with sales maintaining a relatively steady pace and prices experiencing moderate declines year-over-year. Although economists had anticipated a rise in new home sales, the actual figures reflect a slight contraction, emphasizing the volatility inherent in monthly data. Despite multiple interest rate hikes by the Federal Reserve since March 2022, the new homes market has remained resilient, primarily due to the limited availability of existing homes for sale. While the housing market appears to be turning a corner, the persistent supply shortage continues to exert upward pressure on house prices, hindering access to homeownership for many. However, the recent decline in the median new house price is welcomed by economists as it suggests improvements in affordability and could help mitigate inflationary pressures. Looking ahead, despite some regional variations, surveys indicate a positive outlook for new home sales, supported by builder optimism and ongoing efforts to expand supply. Nonetheless, the sustainability of current incentives offered by builders remains uncertain, posing potential challenges to future market dynamics. Overall, amidst fluctuations in mortgage rates and supply dynamics, the new homes market in the U.S. demonstrates resilience, though challenges persist in achieving long-term affordability and accessibility for prospective homebuyers.
In financial markets, notable equities such as Valero Energy Corporation (NYSE:VLO), SolarEdge Technologies, Inc. (NASDAQ:SEDG) and BigCommerce Holdings, Inc. (NASDAQ:BIGC) have received downgrades from analysts among many other companies.
10. Tesla, Inc. (NASDAQ:TSLA)
Price Reaction after the Downgrade: +1.80 (+1.05%)
On March 25, Mizuho analyst Vijay Rakesh revised their outlook on Tesla, Inc. (NASDAQ:TSLA), downgrading it from Buy to Neutral while setting a price target of $195. Despite maintaining a positive view on the overall electric vehicle (EV) sector and its gradual transition toward electrification, the analyst highlighted near-term hurdles affecting Tesla, Inc. (NASDAQ:TSLA) performance. These challenges include constraints in current EV demand and tightening liquidity, which could pose difficulties for the company through 2025. Despite the downgrade, Tesla, Inc. (NASDAQ:TSLA) stock saw a modest increase of 1.05% following the announcement, closing at $172.63 on the same day. In line with the recent downgrades of Valero Energy Corporation (NYSE:VLO), SolarEdge Technologies, Inc. (NASDAQ:SEDG), and BigCommerce Holdings, Inc. (NASDAQ:BIGC), analysts have also revised their ratings for Tesla, Inc. (NASDAQ:TSLA).
Alger Spectra Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its fourth quarter 2023 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) is an electric vehicle manufacturer with a significant technological lead in its large and rapidly growing addressable market. Tesla is a transportation company that is setting the pace for industry innovation, in our view. During the quarter, the company reported weaker-than-expected fiscal third quarter earnings, where gross margins were negatively impacted by factory downtime and ramping production volumes at new manufacturing plants. However, the company noted that they remain confident by the amount of data that Tesla’s established and growing fleet of vehicles has gathered, which may bode well for the company’s full self-driving capabilities.”
09. Papa John’s International, Inc. (NASDAQ:PZZA)
Price Reaction after the Downgrade: +0.58 (+0.88%)
On March 22, BTIG analyst Peter Saleh adjusted his stance on Papa John’s International, Inc. (NASDAQ:PZZA), downgrading the stock from Buy to Neutral. This adjustment in rating reflects Saleh’s assessment of the pizza chain’s performance within the restaurant industry. It reflects a shift in Saleh’s perception of the company’s potential performance. While previously advocating for a bullish outlook, Saleh now views the stock more neutrally, possibly due to changing market conditions or company-specific factors. Despite the downgrade, Papa John’s International, Inc. (NASDAQ:PZZA) stock experienced a slight uptick of 0.88% following the announcement, closing at $66.32 on March 25. In alignment with the recent trend observed in Valero Energy Corporation (NYSE:VLO), SolarEdge Technologies, Inc. (NASDAQ:SEDG), and BigCommerce Holdings, Inc. (NASDAQ:BIGC), analysts have also downgraded Papa John’s International, Inc. (NASDAQ:PZZA).
Artisan Small Cap Fund made the following comment about Papa John’s International, Inc. (NASDAQ:PZZA) in its Q3 2023 investor letter:
“Notable trims in the quarter included Papa John’s International, Inc. (NASDAQ:PZZA) Advanced Drainage and BlackLine. Papa John’s is a global operator and franchisor of pizza delivery and carryout restaurants. We originally invested in the company after a complete executive management team overhaul— notably, hiring a CEO, Rob Lynch, to spearhead a turnaround. Mr. Lynch brings previous leadership experience at large franchisors Arby’s and Taco Bell—where he worked alongside current Chipotle CEO Brian Niccol—and a marketing background at P&G. At Arby’s, Mr. Lynch led a turnaround effort where he shaped the company’s successful “We have the meats!” marketing campaign. Mr. Lynch has focused on reestablishing Papa John’s premium positioning with new food options, advertising campaigns and operational cost-cutting measures meant to improve margins. While we continue to believe in the long-term turnaround story, it is taking longer than we had originally expected. We began to harvest the position to fund higher conviction ideas.”
08. Precigen, Inc. (NASDAQ:PGEN)
Price Reaction after the Downgrade: +0.0100 (+0.7168%)
On March 22, JPMorgan analyst Brian Cheng made a significant adjustment to his evaluation of Precigen, Inc. (NASDAQ:PGEN), a prominent player in the biotechnology sector. Cheng downgraded the company’s rating from Neutral to Underweight, indicating a shift in his perception of Precigen, Inc. (NASDAQ:PGEN) future prospects within the highly competitive biotech industry. This alteration in stance suggests that Cheng believes Precigen may face challenges or underperform relative to its peers in the coming period. Cheng’s revision highlights specific concerns or risks that he believes could impact Precigen’s performance in the foreseeable future. Despite the downgrade, the stock was up 0.7168% on March 25, closing at $1.41.
07. Pfizer Inc. (NYSE:PFE)
Price Reaction after the Downgrade: +0.07 (+0.26%)
On March 22, analysts at Argus Research made a significant adjustment to their evaluation of Pfizer Inc. (NYSE:PFE), a leading player in the pharmaceutical industry. The analysts downgraded Pfizer Inc. (NYSE:PFE) stock rating from Buy to Hold, citing concerns about “near-term headwinds” that the drugmaker is expected to encounter in its journey toward revenue growth. The decision to downgrade Pfizer Inc. (NYSE:PFE) likely reflects a comprehensive assessment of various factors affecting the company’s performance, including its revenue projections, margin outlook, and patent expiration risks. The analysts pointed out that Pfizer Inc. (NYSE:PFE) revenue growth forecast of 3% to 5%, excluding COVID-19 products and the Seagen acquisition, represents a decrease from the 7% growth experienced in 2023. They also highlighted the anticipated decline in revenue from COVID-related products, which is expected to result in lower gross and operating margins. Moreover, Pfizer faces the challenge of offsetting revenue declines from products that will lose patent protection and exclusivity between 2025 and 2030. This necessitates finding alternatives to compensate for the approximate $17 billion in annual revenue that these products are projected to lose due to loss of exclusivity (LOE). As a result of these factors, the analysts have revised down their adjusted earnings per share (EPS) estimate for Pfizer in 2024 to $2.15 from the previous estimate of $3.25.
Looking ahead, the analysts have set a new EPS estimate of $2.70 for 2025 and adjusted the forecast for the five-year EPS growth rate to 7%, down from the earlier projection of 9%. These adjustments reflect the analysts’ cautious outlook on Pfizer Inc. (NYSE:PFE) future earnings potential and growth prospects within the pharmaceutical sector. Despite the downgrade, investors responded with a modest increase in Pfizer Inc. (NYSE:PFE) stock price, which rose by 0.26% on March 25, closing at $27.43. This reaction suggests that while some investors may have tempered their optimism about Pfizer’s near-term performance, others may still see potential value in the company’s long-term strategy and pipeline of products. The market’s response underscores the complexity of evaluating pharmaceutical stocks and the importance of considering various factors impacting their performance.
06. PBF Energy Inc. (NYSE:PBF)
Price Reaction after the Downgrade: +0.02 (+0.04%)
On March 22, Mizuho analyst Nitin Kumar made a notable adjustment to his assessment of PBF Energy Inc. (NYSE:PBF), a prominent player in the oil refining industry. Kumar downgraded PBF Energy’s stock rating from Buy to Neutral, indicating a shift in his recommendation for investors. Despite the downgrade, Kumar raised the price target for PBF Energy from $52 to $58, suggesting a revised expectation for the company’s future valuation. While the downgrade indicates a more neutral stance on PBF Energy Inc. (NYSE:PBF) stock, the upward revision of the price target suggests that Kumar still sees potential upside for the company, albeit at a more moderate level than previously anticipated. This nuanced approach may reflect Kumar’s belief that while PBF Energy Inc. (NYSE:PBF) may not offer the same level of investment opportunity as before, it still has room for growth and value appreciation. Following the downgrade, investors responded with a marginal increase in PBF Energy Inc. (NYSE:PBF) stock price, which rose by 0.04% on March 25, closing at $56.30. This reaction suggests that while some investors may have adjusted their expectations in light of the downgrade, others may still perceive PBF Energy Inc. (NYSE:PBF) as a viable investment option within the oil refining industry. The market’s response underscores the complexity of evaluating energy stocks and the importance of considering a range of factors when making investment decisions.
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Disclosure: None. Analysts on Wall Street Lower Ratings for These 10 Stocks is originally published on Insider Monkey.
