The S&P 500 is up 0.19% while the Dow index has surged up 0.31%. As the broader market booms, there are a few stocks that are lagging the market. Some of these stocks have a bearish outlook and the analysts are adjusting their ratings accordingly.
While the US economy seems comfortably on the path of recovery, certain sectors have more risks associated with them. In other cases, stocks receive a downgrade when they have already run up considerably and analysts do not see more upside despite better earnings and macroeconomic environment. For investors, it is vital to understand why stocks receive a downgrade so they can plan to shift their investments accordingly.
We looked at 5 stocks that analysts are bearish on. To come up with the list of 5 stocks that analysts are bearish on, we looked at stocks that recently received a downgrade and have a market cap of at least $1 billion.
5. NextEra Energy Partners (NYSE:NEP)
NextEra Energy has lost 6% in the last 5 days of trading because of doubts over its growth prospects. Analysts at BMO Capital downgraded the stock from Outperform to Market Perform and cut the stock’s price target to $18 from the previous price target of $26.
The company’s future prospects are clouded for multiple reasons. First, the possibility of the Fed pausing rate cuts is a big threat to NEP. The company’s market cap has shrunk to just 20% of where it was 2 years ago. Its overleveraged financial position continues to be a threat to the company.
However, investors are wondering if all the negatives are already priced in. Last month, J.P. Morgan published a report on the stock expressing how the firm’s strategic review could bring positive results and that the negatives associated with the company are over-discounted. Once the company gives an update on its strategic review, investors will get more clarity on the company’s future direction.
4. Las Vegas Sands (NYSE:LVS)
LVS stock had a difficult December but even that pales in comparison to its YTD returns of -12.38%. Morgan Stanley made matters worse when it downgraded the company’s shares from Overweight to Equal-weight. The investment bank believes all the upside is already priced in, highlighting 5 years of stock volatility where the stock hasn’t really broken away in either direction.
J.P. Morgan analyst Stephen Grambling believes the company’s Macau operations are being overestimated and has estimated its growth below what other analysts on Wall Street are predicting. He cites the deflation and housing crisis in China as the main reason for this pessimism, but the possibility of a US-China trade war is also a threat.
Once the company’s renovation works at the Londoner and Venetian arena are complete, it will be able to focus on its business better. However, as far as the stock is concerned, even the positive developments associated with this are priced in according to analysts.
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