In this article, we discuss the 5 stocks recently downgraded by analysts. If you want to see some other stocks on the list, go directly to Analysts are Downgrading These 11 Stocks.
5. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 42
Shares of Ally Financial Inc. (NYSE:ALLY) slipped over two percent after the opening bell on Thursday, October 6. The drop came after Raymond James downgraded the financial services company from “Outperform” to “Market Perform.”
Analyst Michael Long believes increasing macro uncertainty could potentially lead to higher loan losses, hurting the growth of financial stocks, including Ally Financial Inc. (NYSE:ALLY). Long also cautioned about a possible compression in net interest margin.
Separately, Ally Financial Inc. (NYSE:ALLY) appeared in the second-quarter 2022 investor letter of investment management firm Oakmark Funds. Here’s what the firm said:
“As for Ally Financial, fears of a recession drove the stock price down more than 20% for the period, but business fundamentals have remained strong and the shares now trade for just a mid-single-digit multiple of current earnings. We believe today’s price ignores the funding cost improvements and well-capitalized nature of Ally’s balance sheet. We continue to own both investments given their significant discounts to our estimates of business value.”
4. Splunk Inc. (NASDAQ:SPLK)
Number of Hedge Fund Holders: 47
Shares of Splunk Inc. (NASDAQ:SPLK) slid over five percent in early trading on Thursday, October 6, after UBS analyst Karl Keirstead lowered his ratings for the software company from “Buy” to “Neutral.”
Referring to his recent round of industry checks, Keirstead said Splunk Inc. (NASDAQ:SPLK) is facing multiple headwinds besides macro uncertainty. He also cut his price target for the California-based company from $125 per share to $86 per share.
Meanwhile, investment management firm Vulcan Value Partners also discussed Splunk Inc. (NASDAQ:SPLK) in its second-quarter 2022 investor letter, stating:
“Splunk Inc. is a software company for managing and gaining insights from data. Despite being a material detractor during the quarter, Splunk reported better than expected revenue, margins and guidance. Revenue increased 34% and the company produced a 20% free cash flow margin. Additionally, Gary Steele started his position as the new CEO. Gary was the founder of Proofpoint and led that company for 20 years prior to selling it to Thoma Bravo for $12 billion last year.
We believe Splunk’s long-term prospects remain strong. As they have transitioned their customers to the cloud, the company is generating good free cash flow and its margins are increasing and have the potential to expand. The company has a solid competitive position, a large market, and we expect its growth to be strong and durable.”
3. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 58
Atlantic Equities reduced its ratings for Morgan Stanley (NYSE:MS) from “Overweight” to “Neutral” on Wednesday, October 5. Analyst John Heagerty was moved by a slowdown in investment banking activity and dwindling equity markets.
Heagerty also cut his price target for Morgan Stanley (NYSE:MS) from $95 per share to $85 per share. Morgan Stanley shares marginally moved down in the previous trading session following the downgrade.
Separately, asset management firm Matrix Asset Advisors also shared its views about Morgan Stanley (NYSE:MS) in its second-quarter 2022 investor letter. Here’s what the firm said:
“Morgan Stanley (NYSE:MS) is one of the world’s leading investment banks and wealth management firms. As the company has grown its wealth management business its earnings have become more predictable and valuable. The management team is very shareholder-friendly, allocating funds not needed to grow the business to repurchase shares and raise their dividend. In late June, the company announced an 11% increase in its dividend and a $20 billion multi-year share repurchase program. The company’s annual dividend of $3.10 per share provides a current dividend of 3.7% at the June 30 closing price.”
2. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 69
Shares of Twitter, Inc. (NYSE:TWTR) inched lower on Wednesday, October 5, after Vertical Group cut its ratings for the microblogging site from “Buy” to “Neutral,” citing its uncertain future.
Analysts Phil Leggiere was primarily moved by the lack of clarity around Twitter’s management and macroeconomic challenges. Leggiere thinks these factors are hindering the growth of Twitter, Inc. (NYSE:TWTR).
Meanwhile, several news agencies reported that Twitter, Inc. (NYSE:TWTR) might reach a deal with Elon Musk to end their legal row. Musk reportedly wants to proceed with his $44 billion buyout proposal if the social networking service drops its lawsuit against him.
1. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
Erste Group slashed its ratings for NIKE, Inc. (NYSE:NKE) from “Buy” to “Hold” on Wednesday, October 5. The research firm pointed towards the company’s increasing inventories, falling operating income and higher costs.
Earlier this week, Argus also downgraded NIKE, Inc. (NYSE:NKE) from “Buy” to “Hold.” Analyst John Staszak said the company is trimming prices to reduce inventory levels and the strategy is hurting its profit margins.
The latest downgrades came just days after NIKE, Inc. (NYSE:NKE) said its margins would likely stay under pressure in the remaining year.
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