In this article, we discuss the 5 stocks that analysts are cutting price targets of. If you want to read our detailed analysis of these stocks, go directly to Analysts are Cutting Price Targets of These 15 Stocks.
5. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 67
NIKE, Inc. (NYSE:NKE) is placed fifth on our list of 15 stocks that analysts are cutting price targets of. The company markets athletic footwear, apparel, and equipment. It is headquartered in Oregon.
On September 27, investment advisory Barclays reiterated an Overweight rating on NIKE, Inc. (NYSE:NKE) stock but lowered the price target to $185 from $194, noting that the quarterly results of the firm had “disappointed” on the back of inventory shortages.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in NIKE, Inc. (NYSE:NKE) with 8.7 million shares worth more than $1.3 billion.
In its Q4 2020 investor letter, Dynamo Cougar, an asset management firm, highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:
“Nike used to have a very traditional IT infrastructure, which was the starting point for their transformation. Back in 2013 the company had most of their IT in one data center and two distinct IT and software development teams. The infrastructure was organized in a way that all IT solutions, such as Nike.com and Nike apps, were running on the same servers and databases. The result was that any change had to be approved and then deployed with the next release. It was a very manual process, depended on a number of different vendors, and had to be approved by a waterfall process involving both the software and the IT teams. As of 2018, the company has four AWS regions, 150 software engineers, three development locations, and multiple data center locations. In the process, the company decided that they would not just lift and shift their existing applications from their own servers to the public cloud, but instead decided to rethink every single component of their IT organization. The results show that this transformation worked. The organization went from one software deployment every two months to 2.6 deployments per day. Nike went from 90% manual software testing to 100% automated testing, which freed up a lot of developer time. They managed to reduce the time to make small changes on the website and apps from 3 hours to 5 seconds, which means they could react to sports and similar live events. In the past it took more than six months to add a new experience to their digital services, and today it takes one day. In the past they would have a 3-month lead time for new hardware and today they can scale and deploy without any lead time.5 The IT infrastructure now supports 50+ commerce countries versus 6 in 2012, supports 25 languages versus 7, and enables the e-commerce site to access the inventory of 500+ retail stores.
The early move to the cloud and the willingness to adapt to the new environment also allowed Nike to benefit from some significant learnings. For instance, the company first used the Cassandra database when they moved to the cloud. However, due to many technical limitations, it would not allow them to scale for peak demand. Peak demand was becoming a big problem because the Nike SNKRS App would launch products with very limited availability, which meant that millions of people would access the app at the same time. Nike then decided to move to the AWS DynamoDB database (a platform offering), which allowed them to scale up prior to these launches, and thereby spend 98% less than with Cassandra, while offering the same service. In addition, they managed to monitor the launches in real time, which allowed them to react to problems and error messages within seconds. The vast amount of data that is generated within this very short period is now analyzed with machine learning techniques to improve the stability, reliability, and optimization of future launches. The company is working on a number of other efforts that benefit from the cloud environment, such as the implementation of RFID whose data output is managed through the AWS IoT offering.
The benefits of this transformation to the consumer are clear. Nike can now deal with higher demand, deal with sudden spikes in orders, offer better product recommendations, offer more customization, provide better product fulfillment, and more. In addition, the company benefits from a leaner and more efficient IT organization, better product conversion, more feedback data from customers, social integration into products, and ultimately a more satisfied costumer. We think Nike’s continued investment into their modern IT stack will be a key differentiator for their competitive positioning.”
4. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 87
Micron Technology (NASDAQ:MU) is an Idaho-based firm that develops and sells memory and storage products. It is ranked fourth on our list of 15 stocks that analysts are cutting price targets of.
On September 29, investment advisory Wedbush maintained a Neutral rating on Micron Technology (NASDAQ:MU) stock and lowered the price target to $85 from $105, noting that the guidance numbers of the firm for the coming fiscal quarter were below consensus estimates.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Micron Technology (NASDAQ:MU), down from 100 in the preceding quarter worth $7.6 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
3. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 94
Wells Fargo & Company (NYSE:WFC) is a California-based financial services company. It is placed third on our list of 15 stocks that analysts are cutting price targets of.
On September 28, investment advisory Morgan Stanley downgraded Wells Fargo & Company (NYSE:WFC) stock to Equal Weight from Overweight and reduced the price target to $46 from $49. Betsy Graseck, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $7 billion in Wells Fargo & Company (NYSE:WFC), down from 96 in the previous quarter worth $7.4 billion.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Wells Fargo & Company (NYSE:WFC) was one of them. Here is what the fund said:
“Detractors to performance relative to the index include financial services holdings such as Wells Fargo. While banks in general have suffered due to the recession and experienced credit losses, Wells Fargo also suffered from operational missteps. It is our expectation, however, that our bank holdings in general will benefit from stronger economic growth as the pandemic recedes; and we believe Wells Fargo in particular, will, over time, lower their costs and successfully grow their businesses.”
2. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 146
Alibaba Group Holding Limited (NYSE:BABA) is ranked second on our list of 15 stocks that analysts are cutting price targets of. The firm operates as a diversified technology firm and is headquartered in China.
On September 29, investment advisory Bank of America reiterated a Buy rating on Alibaba Group Holding Limited (NYSE:BABA) stock but lowered the price target to $254 from $285, citing a broader ecommerce slowdown as one of the reasons behind the lower target.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE:BABA) with 14 million shares worth more than $3.2 billion.
In its Q1 2021 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) is placed first on our list of 15 stocks that analysts are cutting price targets of. The company operates as a technology firm and is headquartered in Washington.
On September 27, investment advisory Morgan Stanley maintained an Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN) stock but lowered the price target to $4,100 from $4,300, predicting that the logistics workforce and rising wages would put the firm under profit pressure.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN) with 3.8 million shares worth more than $13 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
You can also take a peek at 15 Dividend Stocks People Buy for Early Retirement and 10 Best Tech ETFs to Buy According to Reddit.
