In this article, we discuss the 5 stocks receiving downgrades from analysts. If you want to see more such stocks on the list, go directly to Analysts on Wall Street Lower Ratings for These 10 Stocks.
05. Target Corporation (NYSE:TGT)
Price Reaction after the Downgrade: -2.85 (-2.23%)
On August 22, Daiwa Securities executed a significant adjustment in its assessment of Target Corporation (NYSE:TGT), a notable retail company. Previously maintaining an ‘Outperform’ rating for Target Corporation (NYSE:TGT), Daiwa Securities has opted to lower this rating to ‘Neutral’. The firm has substantially reduced its previously set price target for the stock, bringing it down from $163.00 to $134.00. These recommendation and price target changes directly respond to Target Corporation (NYSE:TGT) Q2 earnings announcement. Target Corporation (NYSE:TGT) Q2 earnings report revealed an EPS Normalized Actual of $1.80, surpassing expectations by $0.38. However, the company’s revenue for the same period stood at $24.77 billion, falling short of expectations by $458.66 million.
Daiwa Securities’ decision to downgrade Target’s rating and adjust its price target may have been influenced by the mixed results in the Q2 earnings report. While Target exceeded earnings per share estimates, the revenue figures missed expectations. Such a scenario could prompt a reassessment of the stock’s investment potential, reflecting concerns about the company’s revenue growth and overall market performance.
Smead Value Fund made the following comment about Target Corporation (NYSE:TGT) in its second quarter 2023 investor letter:
“Our biggest detractors were Target Corporation (NYSE:TGT), Warner Brothers (WBD), and Pfizer (PFE). Target was our worst performer in the quarter, primarily driven by customers and public reaction to in-store promotions for the month of June. We believe management has listened to its core customers, made the necessary changes, and avoided structural damage to the brand.”
04. Certara, Inc. (NASDAQ:CERT)
Price Reaction after the Downgrade: -0.44 (-2.73%)
Certara, Inc. (NASDAQ:CERT) experienced a decline in its stock price on August 22 following a downgrade by Jefferies. The investment firm adjusted its rating on Certara, Inc. (NASDAQ:CERT) from ‘Buy’ to ‘Hold’. The rationale for this decision was rooted in a reduced expectation of growth for the health technology company in the upcoming year, specifically in 2024. The catalyst for this downgrade seems to be the CFO of Certara, Inc. (NASDAQ:CERT), John Gallagher, who presented a less optimistic near-term outlook for the company during an investor presentation. Gallagher’s assessment likely cast uncertainty on the company’s immediate future, prompting Jefferies to reconsider its positive stance on Certara, Inc. (NASDAQ:CERT) stock.
Such adjustments in analyst ratings often carry weight in the market, reflecting expert opinions on a company’s growth prospects and potential challenges. The downgrade from ‘Buy’ to ‘Hold’ suggests Jefferies now sees a more subdued outlook for Certara, Inc. (NASDAQ:CERT) stock, potentially impacting investor sentiment and trading behavior.
03. Medical Properties Trust, Inc. (NYSE:MPW)
Price Reaction after the Downgrade: -0.24 (-3.42%)
On August 21, JPMorgan significantly adjusted its evaluation of Medical Properties Trust, Inc. (NYSE:MPW). The company’s rating has been downgraded from ‘Neutral’ to ‘Underweight’. With this shift, JPMorgan has revised the price target for Medical Properties Trust, Inc. (NYSE:MPW) downward. The previously set target of $9 has been adjusted to $7. This alteration in rating and price target reflects JPMorgan’s revised outlook on the investment potential of Medical Properties Trust, Inc. (NYSE:MPW). The shift to an ‘Underweight’ rating implies that the firm believes the stock’s performance might be below average compared to other investment opportunities. The adjusted price target of $7 indicates JPMorgan’s projection of where the stock’s value might stabilize.
Miller Value Partners Income Strategy made the following comment about Medical Properties Trust, Inc. (NYSE:MPW) in its second quarter 2023 investor letter:
“Medical Properties Trust, Inc. (NYSE:MPW) gained after it reported 1Q23 revenues of $350.2MM, -14.5% Y/Y, below consensus of $352.5MM, and Normalized Funds from Operations (FFO)/share of $0.37, -21.3% Y/Y, slightly below consensus of $0.38. The company’s CEO noted “The terms of recently announced transactions including Springstone, the acquisition by CommonSpirit of Steward’s Utah operations, Healthscope, and Prime, have valued our hospital investments near and in excess of our original purchase prices. This confirmation of our underwritten asset values by sophisticated market participants, as well as our existing liquidity and prudently planned debt structure, position us to have no debt maturities until 2025.” The REIT saw a modest uptick in leverage during the quarter, with the company’s Adjusted Net Debt to Annualized Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (EBITDAre) ratio standing at 6.5x as of quarter-end, compared to 6.4x as of 12/31/22. Management maintained its quarterly dividend of $0.29/share, or a 12.5% annualized yield. Management updated full-year 2023 (FY23) guidance for Normalized FFO/share of $1.56 (vs. prior guidance for $1.58), implying a P/FFO multiple of 5.9x, to account for the impact of announced deleveraging asset sales (and expected $1.4B in debt reduction).”
02. Sarcos Technology and Robotics Corporation (NASDAQ:STRC)
Price Reaction after the Downgrade: -0.0700 (-5.83%)
Sarcos Technology and Robotics Corporation (NASDAQ:STRC) experienced a decline of approximately 5% in pre-market trading on August 21. This drop came in response to a downgrade by Jefferies. The reason for the downgrade was cited as “extremely limited” visibility regarding the prospects of the advanced robotic systems company. In light of this lack of visibility, Jefferies lowered its recommendation on Sarcos Technology and Robotics Corporation (NASDAQ:STRC) from ‘Buy’ to ‘Hold’. Alongside this change, the agency also substantially adjusted the price target. The previous price target of $4.25 has been significantly revised downward to $1.15.
Jefferies’ downgrade and the subsequent stock movement emphasize the influential role of expert opinions and analyst ratings in the stock market. The downgrade from ‘Buy’ to ‘Hold’ signifies a shift in sentiment, likely reflecting Jefferies’ concerns about the company’s immediate growth potential. The stark reduction in the price target suggests that Jefferies anticipates a much lower valuation for Sarcos Technology and Robotics Corporation (NASDAQ:STRC) than its previous assessment.
01. Napco Security Technologies, Inc. (NASDAQ:NSSC)
Price Reaction after the Downgrade: -14.87 (-38.71%)
On August 21, Lake Street Capital Markets analyst Jaeson A. Schmidt made significant adjustments to his evaluation of Napco Security Technologies, Inc. (NASDAQ:NSSC). Formerly having a ‘Buy’ rating for the company, Schmidt has opted to lower the rating to ‘Hold’. This shift in perspective is accompanied by a notable reduction in the previously set price target for Napco Security Technologies, Inc. (NASDAQ:NSSC). The earlier price target of $40 has now been revised downward to $30. This adjustment in the price target suggests Schmidt’s recalibration of where the company’s stock value might stabilize in the foreseeable future.
The decision by Lake Street Capital Markets to downgrade Napco Security Technologies, Inc. (NASDAQ:NSSC) to ‘Hold’ likely reflects Schmidt’s assessment of the company’s immediate growth prospects and market dynamics. The shift from a ‘Buy’ rating to a ‘Hold’ rating suggests that Schmidt believes the stock’s potential performance might be more subdued than his previous assessment.
Wasatch Global Investors made the following comment about Napco Security Technologies, Inc. (NASDAQ:NSSC) in its Q3 2022 investor letter:
“Another meaningful contributor was Napco Security Technologies, Inc. (NASDAQ:NSSC). The company offers electronic security systems for access control, alarm warnings and video surveillance. With component prices elevated because of supply-chain constraints, Napco chose to temporarily sacrifice gross margins on its systems hardware in order to take market share from competitors. This strategy has now paid off in the form of higher-margin recurring revenues from the company’s growing installed base. Meanwhile, Napco has boosted hardware profitability through strategic price increases and improvements to the supply chain as demand remains strong, particularly in its school-security business.”
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