In this article, we will take a look at the 10 stocks receiving downgrades from analysts.
Stocks tied to the S&P 500 and Nasdaq Composite fell this morning, a day after the Federal Reserve hinted that it would keep increasing the rates until inflation comes down. As of 12:09 PM ET, the S&P 500 was negative 0.22 percent, while tech-heavy Nasdaq Composite was down 0.38 percent. In comparison, Dow Jones Industrial Average was up 0.11 percent around the same time.
Meanwhile, Global Payments Inc. (NYSE:GPN), Tyson Foods, Inc. (NYSE:TSN) and Teva Pharmaceutical Industries Limited (NYSE:TEVA) were among the notable stocks that were recently downgraded by analysts.
Baird downgraded Global Payments Inc. primarily over the absence of positive near-term catalysts, while BofA cut its ratings for Tyson Foods, Inc., citing deteriorating macro factors. On the other hand, JPMorgan turned bearish on Teva Pharmaceutical Industries Limited, referring to persistent growth hurdles.
In addition, analysts also lowered their ratings for mobile technology firm AppLovin Corporation (NASDAQ:APP) and healthcare service provider Cano Health, Inc. (NYSE:CANO). Check out the remaining article to find the details of these downgrades.
10. Sprouts Farmers Market, Inc. (NASDAQ:SFM)
Number of Hedge Fund Holders: 24
MKM Partners lowered its ratings for Sprouts Farmers Market, Inc. (NASDAQ:SFM) from “Buy” to “Neutral” on Friday, November 11. Analyst Bill Kirk pointed towards intensifying competition in the industry. Kirk also thinks the company’s profitability tailwind will fade with a drop in inflation.
The downgrade came a couple of days after Sprouts Farmers Market, Inc. released its financial results for the third quarter. The Arizona-based supermarket chain reported earnings of 61 cents per share, beating the consensus of 50 cents. The quarterly sales of $1.59 billion also exceeded the expectations of $1.58 billion.
In addition, Sprouts Farmers Market, Inc. issued an upbeat financial outlook for the current quarter. It projected adjusted earnings in the range of 35 – 39 cents per share, better than analysts’ average estimate of 33 cents per share.
9. Gray Television, Inc. (NYSE:GTN)
Number of Hedge Fund Holders: 25
Wells Fargo analyst Steven Cahall turned bearish on Gray Television, Inc. (NYSE:GTN) on Wednesday, November 9. The analyst was primarily moved by its station acquisitions last year.
He believes Gray Television, Inc. has to carry more leverage due to those acquisitions as industry trends have deteriorated. Cahall also cut his price target for the stock from $25 per share to $7 per share.
Earlier this month, Gray Television, Inc. posted lower-than-expected financial results for the third quarter. The television broadcasting company earned $1.03 per share on revenue of $909 million. The results were below the consensus of $1.41 per share for earnings and $950.2 million for revenue.
8. AppLovin Corporation (NASDAQ:APP)
Number of Hedge Fund Holders: 26
BofA lowered its ratings for AppLovin Corporation from “Buy” to “Neutral” and cut its price target for the mobile tech company from $35 per share to $17 per share on Friday, November 11. The research firm referred to the company’s Q3 earnings miss and a weak outlook for the current quarter.
AppLovin Corporation recently reported earnings of 6 cents per share for the third quarter, marginally below the consensus of 7 cents. Revenue for the quarter also slipped 2 percent versus last year to $713.1 million, while analysts were looking for $728.2 million.
For the fourth quarter, AppLovin Corporation guided for revenue in the range of $685 – $700 million. The outlook is significantly lower than analysts’ average estimate of $794.2 million.
7. Lumentum Holdings Inc. (NASDAQ:LITE)
Number of Hedge Fund Holders: 30
Lumentum Holdings Inc. (NASDAQ:LITE) received a downgrade from BofA analyst Vivek Arya on Friday, November 11. Arya slashed his ratings for the tech company from “Buy” to “Neutral,” citing competitive and macro challenges.
The analyst believes these factors will restrict the upside in the coming quarters. Arya also trimmed his price target for Lumentum Holdings Inc. from $84 per share to $62 per share.
The downgrade followed the company’s weak financial outlook for its fiscal second quarter. Lumentum Holdings Inc. recently projected adjusted earnings of $1.20 – $1.45 per share and revenue between $490 – $520 million for its fiscal Q2. The guidance fell short of the consensus calling for earnings of $1.60 per share on revenue of $540.3 million.
Like Lumentum Holdings Inc., analysts also lowered their ratings for Global Payments Inc., Tyson Foods, Inc. and Teva Pharmaceutical Industries Limited.
6. Cano Health, Inc. (NYSE:CANO)
Number of Hedge Fund Holders: 31
Raymond James downgraded Cano Health, Inc. from “Outperform” to “Market Perform” on Thursday, November 10. The research firm was primarily moved by Cano’s lower-than-expected Q3 results.
Cano Health, Inc. recently reported a loss of 23 cents per share for Q3, wider than analysts’ average estimate for a loss of 5 cents per share. Revenue for the quarter came in at $665 million, missing the consensus of $717.93 million with a big margin.
In addition, Cano Health, Inc. also cut its full-year sales outlook to a range of $2.7 – $2.75 billion, from its previous guidance between $2.85 – $2.9 billion.
Speaking on the results, CEO of Cano Health, Inc., Dr Marlow Hernandez, said in a statement:
“While financial results were below our expectations due to lower revenue from new membership growth, existing membership performed in line with expectations. As these new members integrate into our care platform, we expect they will perform similarly to existing members in future periods. In response to our rapid growth and the higher cost of capital in the current economic environment, we are optimizing key areas of the business to leverage existing assets and prioritize cash flow.”
5. L3Harris Technologies, Inc. (NYSE:LHX)
Number of Hedge Fund Holders: 34
L3Harris Technologies, Inc. (NYSE:LHX) specializes in aerospace and defense technology. It designs and manufactures a range of radio communications products and systems. It is also famous for its advanced defense and commercial technologies for various industries.
The Florida-based company recently received a downgrade from BofA. The research firm lowered its ratings for L3Harris Technologies, Inc. from “Buy” to “Neutral” on Friday, November 11.
BofA Ronald Epstein thinks supply-chain headwinds will impact the growth of L3Harris Technologies, Inc.. Epstein expects supply challenges to persist into 2024. He also cut his price target for the stock from $285 per share to $250 per share.
4. Teva Pharmaceutical Industries Limited (NYSE:TEVA)
Number of Hedge Fund Holders: 35
JPMorgan turned bearish on Teva Pharmaceutical Industries Limited on Monday, November 14. The research firm cut its ratings for the Israeli pharmaceutical company from “Neutral” to “Underweight,” citing persistent growth hurdles.
Referring to the third-quarter report, analyst Christopher Schott said the results once again showed that Teva Pharmaceutical Industries Limited continues to face challenges due to the absence of a growth catalyst in its portfolio.
Earlier this month, Teva Pharmaceutical Industries Limited posted weak financial results for Q3. The company earned 59 cents per share on an adjusted basis, unchanged from the year-ago period and below the consensus of 62 cents per share. Revenue for the quarter fell 8 percent versus last year to $3.59 billion, while analysts were looking for $3.83 billion
Moreover, Teva Pharmaceutical Industries Limited also cut its fiscal 2022 sales outlook to a range of $14.8 – $15.4 billion. The revised guidance is below analysts’ average estimate of $15.46 billion.
3. Tyson Foods, Inc. (NYSE:TSN)
Number of Hedge Fund Holders: 37
BofA lowered its ratings for Tyson Foods, Inc. from “Neutral” to “Underperform” on Wednesday, November 9. Analyst Peter Galbo was primarily moved by deteriorating macro factors and decreasing chicken prices.
Galbo expects beef margins to drop further through 2024. He also cut his price target for Tyson Foods, Inc. from $73 per share to $61 per share.
Meanwhile, Tyson Foods, Inc. delivered mixed financial results for its fiscal fourth quarter on Monday, November 14. The processed meat producer reported adjusted earnings of $1.63 per share, down from $2.30 per share in the same period of 2021. Revenue came in at $13.74 billion, up 7.2 percent on a year-over-year basis. Analysts were looking for earnings of $1.70 per share on revenue of $13.49 billion.
2. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 56
Scotiabank trimmed its ratings for Freeport-McMoRan Inc. (NYSE:FCX) from “Outperform” to “Sector Perform” on Friday, November 11. Analyst Orest Wowkodaw mentioned a range of factors that could impact copper prices this year.
The factors putting downward pressure on the prices include rising interest rates, elevated energy costs, a strong U.S. dollar, Covid restrictions in China and geopolitical uncertainty amid the Russia-Ukraine war.
Separately, investment management firm ClearBridge Investments also discussed Freeport-McMoRan Inc. in its third-quarter 2022 investor letter, stating:
“Seeing better opportunities elsewhere in the materials sector, we exited our position in Ecolab and added to copper producer Freeport-McMoRan Inc. (NYSE:FCX), which supplies a much-needed resource for the energy transition, and specialty chemical company Linde (LIN), which has historically held onto pricing gains it has achieved following increases in energy costs. We think this pricing power should protect profitability during the acute inflationary phase and potentially lead to margin expansion when cost pressures abate. We think this pricing power should protect profitability during the acute inflationary phase and potentially lead to margin expansion when cost pressures abate.”
1. Global Payments Inc. (NYSE:GPN)
Number of Hedge Fund Holders: 57
Global Payments Inc. received a downgrade from Baird on Monday, November 14. The research firm cut its ratings for the Phoenix-based mining company from “Outperform” to “Neutral,” citing the absence of positive catalysts in the near term.
Baird also reduced its price target for Global Payments Inc. from $114 per share to $118 per share.
Separately, Global Payments Inc. also appeared in the second-quarter 2022 investor letter of asset manager Manole Capital Management. Here’s what the firm said:
“Over the next week or so, we will be publishing a stock-specific note on payment processor Global Payments Inc. (NYSE:GPN). We have owned GPN for nearly two decades and it currently is one of our largest positions. We will begin by highlighting recent spending trends, eCommerce developments and how many of our payment companies can actually benefit from inflation and higher costs. We will discuss their business, industry trends, what is driving their growth, and then highlight their compelling valuation.”
You can also take a peek at Steven Boyd and Armistice Capital’s Top Stock Picks and 12 Best Consumer Staple Stocks.
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This article is originally published at Insider Monkey.
