Wall Street Analysts Just Trimmed Price Targets for These 5 Stocks

In this article, we discuss the 5 stocks receiving price-target cut from analysts. If you want to see more such stocks on the list, go directly to Wall Street Analysts Just Trimmed Price Targets for These 10 Stocks.

05. The Procter & Gamble Company (NYSE:PG)

Price Reaction after the Price Target Cut: -0.86 (-0.58%)

On January 18, JPMorgan Chase & Co. implemented substantial adjustments to its evaluation of The Procter & Gamble Company (NYSE:PG), a major player in the consumer goods industry. The financial institution lowered the price target from $169.00 to $162.00 while maintaining an “overweight” rating on the stock. In response to this revision, the closing bell on January 18 witnessed a notable negative price reaction, with The Procter & Gamble Company (NYSE:PG) experiencing a decline of 0.58%. Despite the reduction in the price target, the decision to retain an “overweight” rating suggests a positive outlook, indicating the belief that The Procter & Gamble Company (NYSE:PG) may outperform relative to its industry peers.

Hayden Capital made the following comment about The Procter & Gamble Company (NYSE:PG) in its third 2023 investor letter:

“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, Coca-Cola trades at ~30x P/E despite having the same earnings as 10 years ago. The Procter & Gamble Company (NYSE:PG) is likewise at ~27x P/E, with earnings only ~12% higher than a decade ago (or a ~1% annual growth rate). This equates to a mere 3.3% – 3.7% earnings yield.

Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.

I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Proctor & Gamble is facing disruption from direct-to-consumer brands that offer their products for a fraction of the price.

But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.

Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”