In this article, we will take a look at the 10 tech stocks recently downgraded by analysts.
Notable stocks from the tech sector, including HP Inc. (NYSE:HPQ), NVIDIA Corporation (NASDAQ:NVDA) and Western Digital Corporation (NASDAQ:WDC), were recently downgraded by analysts. HP Inc. (NYSE:HPQ) and Western Digital Corporation (NASDAQ:WDC) received the downgrades primarily due to their weak outlook.
On the other hand, a couple of tech stocks received price-target cuts despite their upbeat earnings and guidance. For instance, Truist trimmed its price target for Broadcom Inc. (NASDAQ:AVGO) from $658 per share to $630 per share on Friday morning, even though the semiconductor giant easily surpassed financial expectations for its fiscal third quarter. Moreover, Broadcom Inc. (NASDAQ:AVGO) issued a solid sales outlook for the current quarter, calling for revenue of about $8.9 billion versus analysts’ average estimate of $8.77 billion.
Many other tech companies, including C3.ai, Inc. (NYSE:AI) and GitLab Inc. (NASDAQ:GTLB), also received downgrades from analysts. Check out the full article below to see the reasons behind the revised ratings for these stocks.
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10. VNET Group, Inc. (NASDAQ:VNET)
Number of Hedge Fund Holders: 14
Shares of VNET Group, Inc. (NASDAQ:VNET) slipped over one percent on Thursday, September 1, 2022, after Credit Suisse downgraded the Chinese data center services provider from “Outperform” to “Neutral,” following its second-quarter results.
Credit Suisse analyst Clive Cheung was primarily moved by the company’s weak sales outlook for the full year. Cheung doesn’t see strong growth visibility in the near term. He cut his price target for VNET Group, Inc. from $7.20 per share to $5.90 per share.
VNET Group, Inc. recently released its Q2 results. While the company met expectations for the quarter, it issued a softer sales outlook for 2022. VNET expects to generate revenue in the range of 7.25 – 7.55 billion yuan for the full year.
9. C3.ai, Inc. (NYSE:AI)
Number of Hedge Fund Holders: 17
Needham lowered its ratings for C3.ai, Inc. from “Buy” to “Hold” on Friday, September 2, 2022. C3.ai, Inc. recently announced a consumption-based pricing model. However, Needham analyst Mike Cikos thinks switching to the new model is challenging and time-consuming.
The downgrade came a day after C3.ai, Inc. lowered its sales guidance. The company expects revenue in the range of $60 – $62 million for the current quarter, below analysts’ average estimate of $71.7 million.
Shares of C3.ai, Inc. lost nearly 20 percent of their value on Thursday, September 1, 2022, following the weak outlook.
8. Infosys Limited (NYSE:INFY)
Number of Hedge Fund Holders: 24
JPMorgan lowered its ratings for Infosys Limited (NYSE:INFY) from “Overweight” to “Neutral” last week. Analyst Ankur Rudra believes India’s IT sector would continue to experience margin pressure in the medium term amid inflation.
Meanwhile, India’s leading IT firms, including Infosys Limited, are reducing employee bonuses as their customers are tightening their budgets due to recession concerns.
According to recent reports, Infosys Limited has cut the variable salary portion of its staff. The variable portion is a part of the total pay package in many Indian firms and depends on the performance of individuals.
7. Seagate Technology Holdings plc (NASDAQ:STX)
Number of Hedge Fund Holders: 25
Shares of Seagate Technology Holdings plc (NASDAQ:STX) fell to a nearly 16-month low on Thursday, September 1, 2022, after Benchmark slashed its ratings for the data storage company from “Buy” to “Hold.” Analyst Mark Miller believes lingering economic weakness could result in lower spending from data center customers.
The downgrade came after Seagate Technology Holdings plc (NASDAQ:STX) reduced its outlook for the first quarter, citing cautious spending from enterprise customers. The company now expects to generate revenue of about $2.1 billion, well below analysts’ average estimate of $2.52 billion.
Like Seagate Technology Holdings plc (NASDAQ:STX), analysts also revised their ratings and price targets for NVIDIA Corporation, Western Digital Corporation and Broadcom Inc..
6. Ambarella, Inc. (NASDAQ:AMBA)
Number of Hedge Fund Holders: 27
Shares of Ambarella, Inc. (NASDAQ:AMBA) fell for two straight days after receiving a downgrade from Summit Insights on Wednesday, August 31, 2022. Summit analyst Kinngai Chan was moved by the near-term risks for Ambarella’s IoT business.
Several other research firms also reduced their price targets for Ambarella, Inc. on August 31. For instance, Stifel lowered its price target for Ambarella from $100 to $94, while KeyBanc slashed its price target from $120 to $100.
The latest coverage from analysts came after Ambarella, Inc. reported a drop in its fiscal Q2 earnings along with a weak outlook. The fabless semiconductor design company projected revenue of $81 – $85 million for the current quarter. The midpoint of the guidance was below the expectations of $85 million.
Earlier this year, investment management firm Carillon Tower Advisers mentioned Ambarella, Inc. in its first-quarter 2022 investor letter, stating:
“Ambarella (NASDAQ:AMBA) supplies video processing and computer vision chips used in the security and automotive markets. The company continues to face supply headwinds from its foundry partner despite robust market demand for Ambarella’s products.”
5. Semtech Corporation (NASDAQ:SMTC)
Number of Hedge Fund Holders: 27
Semtech Corporation (NASDAQ:SMTC) received downgrades from a number of research firms on Thursday, September 1, 2022, after it issued a gloomy outlook for its fiscal third quarter. As a result, the stock lost over 27 percent of its value in the previous trading session.
Cowen analyst Matthew Ramsey lowered his ratings for Semtech Corporation from “Outperform” to “Market Perform,” citing weak Q3 guidance. Ramsey added that the ongoing economic slowdown, particularly in China, is resulting in softer demand trends. He also cut his price target for Semtech Corporation from $65 per share to $43 per share.
In addition, Oppenheimer downgraded Semtech Corporation from “Outperform” to “Perform,” while B. Riley cut its price target for the stock from $63 to $53 on September 1.
4. HP Inc. (NYSE:HPQ)
Number of Hedge Fund Holders: 35
Shares of HP Inc. slid nearly two percent on Thursday, September 1, 2022, after Loop Capital reduced its ratings for the famous PC maker from “Buy” to “Hold,” citing signs of slowing commercial sales.
Loop Capital Analyst Ananda Baruah also referred to the acquisition of Poly, saying the integration would increase HP’s costs and debt. Baruah also cut his price target for HP Inc. from $50 per share to $29 per share.
The downgrade came a couple of days after HP Inc. delivered mixed results for its fiscal third quarter and lowered its earnings outlook for its fiscal year 2022.
3. GitLab Inc. (NASDAQ:GTLB)
Number of Hedge Fund Holders: 36
Shares of GitLab Inc. plummeted nearly 16 percent on Thursday, September 1, 2022, after JPMorgan slashed its ratings for the software solutions provider from “Overweight” to “Neutral,” citing its higher valuation.
Analyst Pinjalim Bora said the valuation of GitLab Inc. is the second highest in the software space. Bora, who has a price target of $63 per share for GitLab Inc., thinks the stock’s risk/reward is fairly balanced at the moment.
Earlier this year, asset management firm Baron Funds, discussed GitLab Inc. in its first-quarter 2022 investor letter, stating:
“While not highlighted in our top purchases, this quarter we also initiated a position in GitLab Inc. (NASDAQ:GTLB) GitLab provides a software development and IT operations (DevOps) platform that developers, product managers, IT operations teams, and security professionals use to collaborate throughout the software development lifecycle. For developers, the GitLab platform addresses the planning, creation, verification, testing, and deployment of code. Once code is shipped into production, IT operations professionals can use GitLab to continuously protect and monitor code and identify any issues or bugs for further updates. The GitLab platform helps more than 15,000 customers reduce time to market for new applications, automate continuous feature updates, reduce security vulnerabilities, and retain developer talent. GitLab is the only end-to-end DevOps platform that addresses all stages of the software lifecycle using a single codebase and unified data model, giving it a competitive advantage over point solutions. GitLab employs an open-source model, which has led to viral adoption among 30 million developers. More than 2,600 of these developers are active contributors to GitLab’s product, enabling the company to release upgrades much faster than competitors. These consistent product enhancements have led to low churn and strong expansion in GitLab’s existing customer base, driving a best-in-class 150%-plus dollar-based net retention rate (a measure of current customer average growth, where a value over 100% equals positive growth).”
2. Western Digital Corporation (NASDAQ:WDC)
Number of Hedge Fund Holders: 43
Shares of Western Digital Corporation hit a new 52-week low of $40.38 on Thursday, September 1, 2022. The drop came after Benchmark lowered its ratings for the hard disk drive maker from “Hold” to “Sell,” citing its weak outlook.
Last month, Western Digital Corporation issued disappointing financial guidance for its fiscal first quarter. Western Digital Corporation guided for adjusted earnings in the range of 35 – 65 cents per share and revenue between $3.6 – $3.8 billion. The forecast was significantly lower than the consensus of $1.88 per share for earnings and $4.75 billion for revenue.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
Daiwa downgraded NVIDIA Corporation from “Outperform” to “Neutral” on Friday, September 2, 2022. Analyst Louis Miscioscia pointed towards weak results and recent restrictions on chip sales to China.
Miscioscia was also moved by the high valuation of NVIDIA Corporation. He cut his price target for the graphics processors maker from $215 per share to $133 per share.
The downgrade came a day after the U.S. government restricted NVIDIA Corporation from selling specific high-performance chips to China. NVIDIA stock fell nearly eight percent on Thursday, September 1, following the restrictions.
Meanwhile, Cathie Wood’s ARK Innovation took advantage of the drop and bought $32 million worth of shares in NVIDIA Corporation on September 1.
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This article is originally published at Insider Monkey.
