In this article, we discuss the 5 stocks receiving downgrades from analysts. If you want to see some more companies receiving ratings-cut, go directly to Wall Street Analysts are Downgrading These 10 Stocks.
5. Avalara, Inc. (NYSE:AVLR)
Number of Hedge Fund Holders: 38
Morgan Stanley downgraded Avalara, Inc. (NYSE:AVLR) from “Overweight” to “Equal Weight” on Tuesday, August 16, 2022, citing an acquisition offer from Vista Equity Partner. Morgan Stanley analyst Keith Weiss believes the valuation of Avalara seems fair and a competing bid for the Seattle-based software firm is unlikely.
Weiss also cut his price target for Avalara, Inc. (NYSE:AVLR) from $111 per share to $93.50 per share. The downgrade came nearly a week after Vista disclosed its plans to buy Avalara, Inc. (NYSE:AVLR) for $8.4 billion.
Earlier this year, Avalara, Inc. (NYSE:AVLR) also appeared in the fourth-quarter 2021 investor letter of investment management firm ClearBridge Investments. Here’s what the firm said:
“Avalara, which offers online tax compliance software for small and medium size businesses and increasingly enterprise customers, also saw its stock lose altitude with many high growth technology companions as some investors reduced financial leverage, although we are unaware of any fundamental disappointments. We continue to believe companies like Avalara will be key players in the democratization of e-commerce.”
4. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 45
Argus lowered its ratings for Southwest Airlines Co. (NYSE:LUV) from “Buy” to “Hold” on Monday, August 15, 2022. Argus analyst John Staszak thinks capacity challenges and inflationary pressures could impact the growth of the Texas-based airline.
Staszak doesn’t see an upside for the stock until there is more clarity around cost stabilization. He reduced his earnings estimate by 5c to $2.45 per share for fiscal 2022. However, Staszak remains optimistic about the long-term growth prospects of Southwest Airlines Co. (NYSE:LUV).
Senior management of Southwest Airlines Co. (NYSE:LUV) also talked about inflationary pressures during the second-quarter earnings call last month. CEO Bob Jordan said in a statement:
“Travel demand surged in second quarter, and thus far, strong demand trends continue in third quarter 2022. As anticipated, we experienced inflationary pressures and headwinds from operating at suboptimal productivity levels in second quarter, which we expect will continue in second half 2022.”
3. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE:DG) received a downgrade from BMO Capital on Monday, August 15, 2022. The research firm cut its ratings for the discount retail stores operator from “Outperform” to “Market Perform.”
BMO Capital analyst Kelly Bania believes the company’s valuation is near its peak levels. She added that more discounts from rivals could also hurt the growth of Dollar General Corporation (NYSE:DG) to some extent.
Meanwhile, Dollar General Corporation (NYSE:DG) recently faced a setback. The U.S. safety regulators imposed a fine of $1.3 million on the company over worker safety violations. The penalty was imposed after the federal inspectors visited Dollar General’s locations in Georgia earlier this year.
2. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 78
Atlantic Equities downgraded Comcast Corporation (NASDAQ:CMCSA) from “Overweight” to “Neutral” on Monday, August 15, 2022. Atlantic Equities analyst Hamilton Faber was moved by the company’s disappointing broadband results for the second quarter. He also trimmed his price target for Comcast Corporation (NASDAQ:CMCSA) from $60 per share to $44 per share.
Comcast Corporation (NASDAQ:CMCSA) announced its Q2 results last month. While the telecommunications company beat financial expectations for the quarter, it failed to add broadband customers in the period. On the other hand, analysts were looking for net additions of 84,000.
1. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 81
Shares of Snowflake Inc. (NYSE:SNOW) slipped nearly two percent on Tuesday, August 16, 2022, after UBS downgraded the Montana-based tech company from “Buy” to “Neutral,” citing its high valuation.
UBS analyst Karl Keirstead referred to his recent conversation with customers, saying nearly half of them anticipate a drop in their budget for data analytics software. Nevertheless, most Wall Street analysts are still bullish on Snowflake Inc. (NYSE:SNOW), maintaining a “Buy” rating for the stock.
Last month, Snowflake Inc. (NYSE:SNOW) also appeared in the second-quarter 2022 investor letter of investment management firm ClearBridge Investments. Here’s what the firm said:
“Snowflake operates a cloud-based data platform for small and medium-sized businesses and enterprise customers. The company is a key beneficiary of software spending moving to the cloud, as well as the increasing strategic importance of data. With the potential to address the large and growing market for data cloud, a roughly $250 billion plus opportunity by 2026, we see a long runway for growth ahead. Although the company is already profitable, we believe Snowflake still has significant room for free cash flow margin expansion.”
You can also take a peek at 10 Best Stocks to Buy According to DE Shaw and Jim Cramer Recommends These 10 Stocks For Recession.
