In this article, we will discuss 10 stocks getting crushed today.
The US equity market is in the red today after the S&P 500 Index and the Dow 30 Index closed positively in the last two consecutive trading sessions. As of 1:16 PM ET, the S&P 500 Index, the Dow 30 Index, and the NASDAQ Composite Index are all down 0.86%, 0.73%, and 0.61%, respectively. Notable stocks such as Microsoft Corporation (NASDAQ:MSFT), Moody’s Corporation (NYSE:MCO), and Carnival Corporation & plc (NYSE:CCL) are amongst the stocks getting crushed today.
Image by Gerd Altmann from Pixabay
Let’s look at why these stocks are declining today and discuss how hedge funds are positioned in them.
10. Zendesk, Inc. (NYSE:ZEN) is down 6.55% as of 1:14 PM ET after David Faber at CNBC stated that the possibility of a takeover is looking very bleak. Faber’s comments come a month after a report revealed that three private equity (PE) firms are looking to acquire Zendesk, Inc. (NYSE:ZEN). The PE firms were Permira, Hellman & Friedan, and Advent International. On May 23, Samad Samana at Jefferies gave Zendesk, Inc. stock a Hold rating and revised the target price from $120 to $110. The analyst highlighted economic uncertainties and the looming risk of recession as the key reasons for the revision in the price target.
Zendesk, Inc. was mentioned in the Q3 2021 investor letter of Carillon Tower Advisers. Here’s what the firm said:
“Zendesk provides customer support software solutions. After successfully navigating the early stages of the pandemic in 2020, the firm has seen its stock cool off on the threat of increased competition from low-cost alternatives. We do not believe that the competitive dynamics have been altered. In fact, the company’s annual revenue growth rate has accelerated in 2021 from the second half of 2020. The shares also currently trade at a deep discount to other cloud-based software vendors.”
Zendesk, Inc. was held by 66 hedge funds at the end of Q1 2022.
9. Intel Corporation (NASDAQ:INTC) is 5.10% in the red as of 1:14 PM ET after the chip maker provided a worse than expected outlook for the second quarter. Christopher Danely at Citi credited the COVID-19 related lockdowns in China and reduced inventory levels as the reasons for the worse outlook. The analyst maintained a Neutral rating on Intel Corporation (NASDAQ:INTC) with a $45 price target. He anticipates the company to lower its Q2 2022 guidance or miss the forecasts. Danely highlighted that the bear case for Intel Corporation is taking place earlier than expected. The analyst slashed the 2022 revenue and EPS estimates from $74.4 billion and $2.63 to $71.9 billion and $2.33, respectively.
Here’s what O’Keefe Stevens Advisory Inc. said about Intel Corporation in its Q1 2022 investor letter:
“Intel announced they are removing stock-based compensation from non-GAAP earnings in 2022 to report results aligning with semiconductor peers. This may seem like a reasonable thing to do as comparability between peers becomes easier. On the other hand, what exactly is the point of adjusted earnings? It is not to conform to some industry norm or because the management teams need to make performance metrics. The point of adjusting earnings is to present results in a light that more closely reflects the actual underlying performance of the business. That is, backing out expenses that might be one-time in nature, such as legal or fire expenses. First off, share-based compensation is an actual expense. Decreasing my ownership stake in a company without receiving any compensation is not free. If a company paid its employees in all stock, would they add back the entire SBC? What a margin profile that would be. Second, should a company be worried about reporting results similar to other companies? Every company is unique. Management should not waste time determining what expenses should be excluded. Run the business, don’t worry about adjusting the numbers.”
As of Q1 2022, Intel Corporation was held by 76 hedge funds.
8. Robinhood Markets, Inc. (NASDAQ:HOOD) has slid 3.61% as of 1:14 PM ET after reports that the California-based online trading platform is set to be impacted by a change in regulation from the US Securities and Exchange Commission (SEC). The move is targeted toward getting better deals for retail investors. SEC Chairman Gary Gensler had stated that the agency would look into the execution requirements to ensure that brokers process the trades at the best possible prices for customers. If the change is applied, Robinhood Markets, Inc. (NASDAQ:HOOD) would be forced to revise its business model.
Claret Asset Management shared its insights on Robinhood Markets, Inc. in its Q4 2021 investor letter. Here’s what the firm said:
“Robinhood went public at $38 a share at the end of July of this year. After a oneday decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that the company does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, it is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
Of the 912 hedge funds in Insider Monkey’s database, 19 funds held a stake in Robinhood Markets, Inc. as of Q1 2022.
7. Altria Group, Inc. (NYSE:MO) has slumped 3.67% as of 1:14 PM ET after the Richmond, Virginia-based cigarette company was downgraded from a Neutral to an Underweight rating by Pamela Kaufman at Morgan Stanley. The analyst also slashed the price target on Altria Group, Inc. (NYSE:MO) from $54 to $50. The downgrade was credited to economic uncertainty and fear of recession. The research firm expects the increase in gas prices to reduce the disposable income of consumers, which would harm cigarette volumes and “enhance trade down risk” for Altria Group, Inc..
Here’s what Broyhill Asset Management said about Altria Group, Inc. in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
Altria Group, Inc. was held by 47 hedge funds as of Q1 2022.
6. Affirm Holdings, Inc. (NASDAQ:AFRM) has declined 6.16% as of 1:15 PM ET after the coverage on the stock was initiated with an Underperform rating by David J. Chiaverini at Wedbush. The analyst gave Affirm Holdings, Inc. (NASDAQ:AFRM) a target price of $15, reflecting a potential downside of 34.3% from the previous closing price. Chiaverini highlighted increased competition, a lack of direction regarding GAAP profitability, and a weak industry forecast due to slowing e-commerce sales as the reasons for the bearish stance on Affirm Holdings, Inc.. E-commerce sales are the driving force of Affirm Holdings, Inc.’s gross merchandise value (GMV).
Here’s what Bireme Capital said about Affirm Holdings, Inc. in its Q4 2021 investor letter:
“We opened a more idiosyncratic short position in a company called Affirm (AFRM) in Q4.
Affirm is a “Buy Now, Pay Later” (BNPL) company founded by former PayPal CTO and cofounder Max Levchin. They provide installment loans to consumers, partnering with retail companies looking to drive higher sales. They have two primary products: a zero-fee installment loan for consumers with the best credit scores, and a more traditional product with 20%+ interest rates for subprime borrowers. Their stated plan is to disrupt the credit industry with more transparent, lower-fee loans.
At a roughly $28b market cap at the start of 2022, AFRM stock was priced at more than 20x trailing sales, a steep price for a money-losing lender. While their early lead in online BNPL transactions and partnerships with fast-growing retailers like Peloton has fueled significant historical growth, a wave of competition has arrived.”
As of Q1 2022, 29 funds reported owning a stake in Affirm Holdings, Inc..
Along with Affirm Holdings, Inc., some other notable stocks that are losing their value today include Microsoft Corporation, Moody’s Corporation, and Carnival Corporation & plc (NYSE:CCL).
5. State Street Corporation (NYSE:STT) has fallen 4.41% as of 1:15 PM ET after reports that the Massachusetts-based diversified financial services firm is considering the acquisition of Credit Suisse Group AG (CS) for CHF 9 ($9.22) per share. State Street Corporation (NYSE:STT) has declined to comment on this development and has said that it is focused on the acquisition of Brown Brothers Harriman’s Investors Services Business. The shares of Credit Suisse are hovering around a 20-year low after the firm revealed that it expects a loss in Q2 2022 from its Investment Banking segment due to the low level of issuance from the capital market along with the widening of credit spreads.
State Street Corporation was held by 29 hedge funds at the end of Q1 2022. Harris Associates was the leading hedge fund investor in State Street Corporation during the first quarter.
4. Carnival Corporation & plc (NYSE:CCL) has plummeted 4.83% as of 1:16 PM ET after the target price for the British-American cruise operator was reduced from $17 to $13 by Jamie Rollo at Morgan Stanley. The analyst maintained an Underweight rating on Carnival Corporation & plc (NYSE:CCL) stock. The company has added a significant amount of debt on its balance sheet and has also issued new shares, diluting the long-term prospects for shareholders. On the brighter side, Carnival Corporation & plc (NYSE:CCL) has announced the return of its ultra-luxury ship Seabourn for the first time since March 2020.
Of the 912 hedge funds in Insider Monkey’s database, 32 funds held a stake in Carnival Corporation & plc (NYSE:CCL).
3. Microsoft Corporation (NASDAQ:MSFT) has dipped 0.65% as of 1:16 PM ET because the Redmond, Washington-based tech giant is facing multiple negative developments today. Firstly, Microsoft Corporation announced that it would significantly lower its presence in Russia but will continue to fulfill contractual obligations. The update is expected to impact 400 employees. Furthermore, Microsoft Corporation parted ways with its virtual reality chief Alex Kipman after reports that he acted inappropriately in front of some female employees. There have been allegations that he watched virtual reality pornography in front of company employees.
Motiwala Capital discussed its stance on Microsoft Corporation in its Q4 2021 investor letter. Here’s what the firm said:
“Microsoft (NASDAQ:MSFT) re-enters our portfolio after a long gap. MSFT sells enterprise and consumer software products as well as hardware products such as the Xbox video game console and Surface laptops. All business segments experienced double-digit revenue growth and earnings per share have compounded in the mid-double digits over the last 5 years. We believe MSFT continues this momentum in the years ahead.”
Microsoft Corporation was held by 259 hedge funds as of Q1 2022.
2. Moody’s Corporation (NYSE:MCO) has declined 1.49% as of 1:16 PM ET after the New York-based credit rating agency was downgraded from an Overweight to a Neutral rating by Simon Clinch at Atlantic Equities. The analyst also reduced the price target on Moody’s Corporation from $370 to $298. Clinch used the S&P Global Inc. decision to suspend its 2022 outlook as the basis for the downgrade. During the conferences conducted by both credit rating agencies last week, it became clearer that there is a significant weakness in global issuance.
Here’s what Qualivian Investment Partners said about Moody’s Corporation in its Q2 2021 investor letter:
“Moody’s: Revenue, operating profit margins, and EPS all exceeded expectations, and annual guidance for these items (and for free cash flow) was raised. In MIS (Moody’s Investors Service) which houses the traditional ratings business, the outlook for debt issuance was raised for the remainder of the year, while MA (Moody’s Analytics) also came in ahead of expectations. The company leveraged strong revenue growth with strong operating profit margin improvement of 200 bps, with EPS coming in $0.22 ahead of consensus estimates. Management alluded to having interesting opportunities in their M&A pipeline, which we will have to assess when the time comes, but Moody’s management team has been very effective at allocating capital in the past toward value-creating bolt-on acquisitions, especially in their Moody’s Analytics business, a key growth driver for the company.”
At the end of Q1 2022, Moody’s Corporation was held by 56 hedge funds.
1. Hanesbrands Inc. (NYSE:HBI) has crashed 2.49% as of 1:16 PM ET after the Winston-Salem, North Carolina-based apparel company was downgraded from Overweight to Equal Weight by Adrienne Yih at Barclays. The analyst sees the risk of excess wholesale inventory increasing as key customers raise their promotional activity and put in new orders conservatively. Yih thinks that the high level of inventory and the weak consumer demand will cause challenges for Hanesbrands Inc. (NYSE:HBI). The analyst concluded that the short-term risks outweigh the long-term benefits for Hanesbrands Inc..
Hanesbrands Inc. was held by 23 hedge funds as of Q1 2022.
You can also take a peek at the 10 Best Undervalued Dividend Stocks To Buy and 10 Best Recession Stocks To Buy.
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This article is originally published at Insider Monkey.
