Here’s Why Citigroup, Disney, & More Are Deep in the Red Today

With the market deep in the red to conclude the trading week, shares of Ericsson (ADR) (NASDAQ:ERIC), Morgan Stanley (NYSE:MS), Walt Disney Co (NYSE:DIS), and Citigroup Inc (NYSE:C) are leading Friday’s losers, as investors sell each stock for various reasons. Let’s take a closer look at the downside catalysts pushing them down and examine what the world’s greatest investors think of each stock.

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Ericsson (ADR) (NASDAQ:ERIC) shares are 6% lower in morning trading after analysts at Deutsche Bank lowered their rating to ‘Hold’ from ‘Buy’. Despite management’s commitments to cost cutting, the Deutsche Bank analysts don’t think Ericsson’s EPS will grow in 2016, as the company’s top-line shrinks and as weakness in emerging markets weighs on the company’s results. Also adding to the selling pressure is the broader market weakness today. Hedge fund sentiment around Ericsson (ADR) (NASDAQ:ERIC) has been stable, with the number of elite funds long the stock falling by just one to 11 during the latest 13F reporting period.

In other news, Morgan Stanley (NYSE:MS) shares have fallen by more than 4% as ‘risk off’ sentiment permeates throughout the financial sector. Although Morgan Stanley (NYSE:MS) won’t present its earnings results until next Tuesday, investors are selling now because they fear the emerging market weakness in conjunction with a slowing Chinese economy and a volatile stock market could hurt Morgan Stanley’s outlook for the next few quarters. Hedge funds have been bullish on the stock, however, with  Cliff Asness‘ AQR Capital Management among 57 elite funds in our database that were long Morgan Stanley at the end of September. That 57 figure was up by nine from June 30.

On the next page we examine why it’s been a gloomy morning for Walt Disney Co and Citigroup Inc.

Despite Star Wars likely being the most lucrative movie franchise in history, analysts at Barclays downgraded Walt Disney Co (NYSE:DIS) today to ‘Underweight’ from ‘Equal Weight’ and trimmed their price target on the stock to $89 from $98 per share. The Barclays analysts downgraded the media giant because they think that Disney crown jewel ESPN is declining as more millennials cut the cord and as the company’s studio business struggles to unlock more growth outside of acquisitions. Because of the lack of major positive catalysts, the analysts think that Disney should trade in-line with its peers in terms of valuation. Walt Disney Co (NYSE:DIS) shares are 3.5% lower this morning as a result.

Some hedge funds evidently share the concerns of the Barclays analysts, as the number of elite funds that were long Walt Disney Co (NYSE:DIS) fell to 48 at the end of September, from 60 at the end of June.

Citigroup Inc (NYSE:C) shares continued their downward trek today after the mega-bank reported fourth-quarter earnings. Although Citigroup’s EPS beat estimates by $0.01 and its revenue exceeded expectations by $770 million (with quarterly EPS of $1.06 on revenue of $18.64 billion), the market was evidently expecting something more. It apparently isn’t enough that the bank’s tangible book value rose to $60.61 per share from $56.71 and that ‘bad bank’ Citi Holdings was profitable, with earnings of $704 million versus the $87 million it pulled in for the same period a year earlier. To be fair, Citigroup Inc (NYSE:C) does have more exposure to emerging markets than other banks, and the bank’s results could head south if China’s economy continues to slow and drags other emerging markets down with it.

Hedge fund sentiment towards Citigroup dipped slightly during the third quarter, with 121 elite funds holding shares as of September 30, down from 126 on June 30.

Disclosure: None