In this article, we will look at the 10 stocks recently downgraded by analysts.
U.S. stocks mostly traded in red this month amid investors’ concerns over future rate hikes. Moreover, the producer price index for the month of November was higher than expected. Wholesale prices rose 0.3 percent last month, above the consensus forecast for a 0.2 percent gain. Investors now fear that the Fed would likely keep the interest rates higher to bring down inflation.
Meanwhile, the changing macro environment compelled analysts to revise their ratings for several stocks. Salesforce, Inc. (NYSE:CRM), Shopify Inc. (NYSE:SHOP) and Mondelez International, Inc. (NASDAQ:MDLZ), were among the notable companies that were recently downgraded by analysts on macro hurdles.
In addition, online lodging marketplace Airbnb, Inc. (NASDAQ:ABNB) and Florida-based cruise line Royal Caribbean Cruises Ltd. (NYSE:RCL), also received downgrades from analysts. Check out the complete article to find the details of these downgrades.
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10. The Boston Beer Company, Inc. (NYSE:SAM)
Number of Hedge Fund Holders: 18
Deutsche Bank turned bearish on The Boston Beer Company, Inc. (NYSE:SAM) on Tuesday, December 6. The research firm downgraded the high-end alcoholic beverage company from “Hold” to “Sell,” citing weakness in its core hard seltzer segment.
Analyst Steve Powers pointed towards dropping seltzer sales amid intensifying competition and increasing pressure on consumer spending. Powers expects Truly sales to drop in the low single digits next year due to these factors. In addition, the analyst expects rising costs to weigh on the profitability of The Boston Beer Company, Inc..
Separately, investment management firm Artisan Partners also discussed Boston Beer’s hard seltzer business in its third-quarter 2022 investor letter. Here’s what the firm said about The Boston Beer Company, Inc.:
“We ended our campaigns in Boston Beer Company. Boston Beer Company sells a focused portfolio of alcoholic beverage brands. In recent years, the company has emerged as one of the leaders in the hard seltzer category, which has grown over 150% in each of the past three years (2018-2020). Boston Beer’s Truly brand, the second-largest seller of hard seltzer, has benefited from this growth and was core to our investment thesis. However, the hard seltzer category’s growth has recently slowed to single digits, falling short of high investor expectations and pressuring Boston Beer’s earnings upside. Truly’s growth was core to our investment thesis, and a recovery is uncertain; thus, we ended our investment campaign.”
9. Tripadvisor, Inc. (NASDAQ:TRIP)
Number of Hedge Fund Holders: 33
Wolfe Research lowered its ratings for Tripadvisor, Inc. (NASDAQ:TRIP) from “Peer Perform” to “Underperform” on Wednesday, November 7. The research firm pointed towards weakness in travel demand.
Analyst Deepak Mathivanan believes travel demand would likely moderate amid the weakening macroeconomic environment in the coming quarters. Mathivanan added that the consensus expectations do not truly reflect the actual situation.
The analyst also thinks the company’s core auction marketplace could face challenges when demand drops in fiscal 2023. In addition, Mathivanan also cut his ratings for the online travel sector, which includes Tripadvisor, Inc., from “Market Weight” to “Market Underweight.”
8. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 34
Unity Software Inc. (NYSE:U) is best known for its software solutions used by developers for designing games and other content for mobile and PCs. The company recently received a downgrade from BTIG.
The research firm cut its ratings for Unity Software Inc. from “Buy” to “Neutral” on Thursday, December 8. Analyst Clark Lampen expects potential pressure on the mobile gaming market to persist over the next couple of years. Lampen also referred to near-term deterioration risk and longer-than-expected recovery of the global mobile gaming market.
Unity Software Inc. has struggled to gain value so far in 2022. The stock has lost more than 70 percent of its value on a year-to-date basis.
7. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Holders: 42
JPMorgan lowered its ratings for Royal Caribbean Cruises Ltd. from “Overweight” to “Underweight” on Tuesday, December 6. Analyst Daniel Adam believes that the Florida-based cruise line could face a funding shortfall of around $400 million by the end of 2023.
Adam added that the company would likely need to raise additional capital of $3.5 billion through an asset or equity sale that would be dilutive to shareholders. He cut his price target for Royal Caribbean Cruises Ltd. from $106 per share to $47 per share.
Besides Royal Caribbean Cruises Ltd., analysts also recently trimmed their ratings for Salesforce, Inc., Shopify Inc. and Mondelez International, Inc..
6. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Holders: 43
Wedbush analyst Seth Basham cut his ratings for Carvana Co. (NYSE:CVNA) from “Neutral” to “Underperform” on Wednesday, December 7. Basham also reduced his price target for the used car retailer to $1 per share, sharply down from $9 per share.
The downgrade came after multiple reports suggested that Carvana Co. might be headed towards bankruptcy. Carvana shares tumbled more than 42 percent on December 7 following the reports.
Used vehicle prices have declined in recent months as rising interest rates have impacted the purchasing power of potential buyers. The affordability factor has been weighing on the growth of Carvana Co., which has plummeted nearly 100 percent on a year-to-date basis, including the latest drop.
5. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 52
UBS trimmed its ratings for Mondelez International, Inc. from “Buy” to “Neutral” on Thursday, December 8, citing limited upside for the stock.
Analyst Cody Ross thinks macro challenges would likely restrict the company’s profitability growth next year. Ross mentioned strong U.S. dollar, increasing interest rates and inflation that would likely cap the growth of Mondelez International, Inc. in the coming quarters.
Separately, investment management firm Coho Partners briefly discussed Mondelez International, Inc. in its third-quarter 2022 investor letter, stating:
“Analysts’ bottom-up estimates for both 2022 and 2023 for the S&P 500 Index are beginning to decline. Coho is not immune to the earnings pressure exerted by a strong USD, although the portfolio on the whole has modestly less foreign revenue exposure relative to the S&P 500 Index. The two most impacted Coho stocks includes Mondelez International (NASDAQ:MDLZ), which gets about 75% of its revenues outside the U.S.”
4. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 58
Morgan Stanley downgraded Airbnb, Inc. from “Equal-Weight” to “Underweight” on Tuesday, December 6. The research firm also cut its price target for the online lodging marketplace from $110 per share to $80 per share.
Analyst Brian Nowak thinks the company’s active listings are expected to grow at a CAGR of 7 percent between 2022 – 2025, down from a CAGR of 12 percent between 2018 – 2022. Nowak added that a drop in active listings would create an occupancy challenge for Airbnb, Inc..
3. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 62
Shopify Inc. received a downgrade from Wolfe Research on Wednesday, December 7. The research firm cut its ratings for the Canadian e-commerce giant from “Outperform” to “Peer Perform,” citing weakening growth due to macro hurdles.
Separately, UBS analyst Kunal Madhukar also issued a “Sell” rating for Shopify Inc. on Thursday, December 8, mentioning competitive pressure from Amazon.
Meanwhile, investment management firm Artisan Partners also discussed Shopify Inc. in its third-quarter 2022 investor letter, stating:
“Shopify Inc. (NYSE:SHOP) is a leading e-commerce platform supporting over 2 million merchants with software, online storefronts and payments technology. Like Uber, Shopify returned to mid-cap territory during Q2 as the company’s profit cycle… (Click here to read the full text)”
2. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 76
Wolfe Research turned bearish on Expedia Group, Inc. (NASDAQ:EXPE) on Wednesday, December 7. The research firm downgraded the online travel company from “Peer Perform” to “Underperform”.
The research firm pointed towards weakness in travel demand. Analyst Deepak Mathivanan believes travel demand would likely moderate amid the weakening macroeconomic environment in the coming quarters. Mathivanan added that the consensus expectations do not truly reflect the actual situation. He has a price target of $85 per share for Expedia Group, Inc..
On the other hand, investment management firm Miller Value Partners expressed optimism about the growth prospects of Expedia Group, Inc. in its third-quarter 2022 investor letter. Here’s what the firm said:
“Expedia Group, Inc. (NASDAQ:EXPE) ($92.69) has a high teens free cash flow yield, trades at 14x 2022 and 10x 2023 earnings. We believe it can sustain earnings per share growth in the mid-teens. It massively improved its business and margins during the pandemic, has repaired its balance sheet and is chaired by an amazing capital allocator, Barry Diller. We think it’s worth more than double the current price.”
1. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 117
Baird cut its ratings for Salesforce, Inc. from “Outperform” to “Neutral” on Thursday, December 8. The research firm also reduced its price target for the cloud-based software company from $200 per share to $150 per share.
Analyst Rob Oliver expressed concerns over macro challenges and the recent departure of senior leadership. He added that macro hurdles could impact the growth of Salesforce, Inc. in the near term.
Separately, investment advisor Aristotle Atlantic Partners, LLC also talked about Salesforce, Inc. in its third-quarter 2022 investor letter, stating:
“We sold Salesforce, Inc. (NYSE:CRM) to reduce our weighting in the Information Technology sector. Salesforce held their investor day, and the company reiterated their organic Fiscal Year 2026 revenue target of $50 billion. This target remains more back-end loaded based on current slowing macroeconomic conditions and requires new annual contract growth well ahead of what the company has been averaging for the past few years. We are skeptical that the company will be able to achieve this revenue target organically and see Merger & Acquisitions (M&A) being key to achieving the growth. While we believe Salesforce has shown good success in growing its non-CRM clouds, we do see more competitive pressures emerging for the Marketing and Customer Service Clouds, specifically on the pricing side during a global economic slowdown.”
You can also take a peek at 14 Safe Stocks To Buy for Beginners and 12 Best Consumer Staple Stocks.
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This article is originally published at Insider Monkey.
