In this article, we will discuss the 10 stocks recently downgraded by analysts. If you want to see more such stocks on the list, you can directly visit Analysts on Wall Street Lower Ratings for These 5 Stocks.
Stock markets displayed volatility as traders prepared for the possibility of a hawkish message from major central banks convening this week to determine interest rates. Brent crude oil, a benchmark, surged beyond $95 per barrel, marking its highest level since November, raising worries about inflation. Oil industry giants such as TotalEnergies SE, BP Plc, and Shell Plc significantly influenced gains in Europe's Stoxx 600 benchmark index. In the United States, equity futures showed minimal movement. On the Chinese stocks front, BlackRock Strategists have revised their stance on Chinese stocks, downgrading them from overweight to neutral. This decision was influenced by concerns surrounding China's property sector and the belief that stimulus measures have not provided the anticipated boost. In a report published on September 18, the strategists, led by Jean Boivin, highlighted reasons for this downgrade, citing a slowdown in growth, less substantial policy stimulus compared to previous instances, ongoing structural challenges indicating deteriorating long-term growth, and the persistence of geopolitical risks.
Across Europe, investor caution arose as the euro area's 10-year Bund yield surged to a 12-year high, reported Reuters. European Central Bank officials reiterated their commitment to stabilizing rates to control inflation. Francois Villeroy de Galhau, a central ECB policymaker, emphasized maintaining rates at 4%, countering calls for higher rates. Market sentiment was cautious, with investors hesitating to invest despite expectations of interest rates peaking. Bund yields, currently at 2.70%, stabilized after recent selling pressure. The Federal Reserve's impending policy meeting, with expectations of a 25-basis-point rate hike, remained a focal point. Rising oil prices raised concerns of slowing disinflation, affecting bond prices. Italy's 10-year bond yield was at 4.50%, and the spread between Italian and German 10-year bond yields, indicating investor confidence, stood at 179 basis points. ECB policy hawks suggested ending bond reinvestments under the Pandemic Emergency Purchase Programme earlier than the 2024 deadline, potentially impacting peripheral bond prices and monetary policy transmission. Markets remained cautious, monitoring central bank decisions and bond yield developments.
On the precious metal side, gold prices held near two-week highs as the U.S. dollar retreated from a six-month peak, with central bank meetings in focus. Spot gold saw a slight 0.1% dip to $1,930.39 per ounce, while U.S. gold futures edged down 0.1% to $1,951.60. The dollar's decline made gold more attractive to foreign buyers ahead of key central bank decisions by the U.S., UK, and Japan. While the Fed is expected to keep rates unchanged, it focuses on its future rate outlook. Fed Chair Powell will likely emphasize ongoing inflation risks but a wait-and-see approach. However, continued rate hikes to control inflation could dampen gold's appeal. In other metals, spot silver fell 0.2% to $23.18 per ounce, platinum eased 0.3% to $930.15, and palladium rose 0.5% to $1,242.01.
In financial markets, notable equities such as OceanFirst Financial Corp. (NASDAQ:OCFC) and PTC Therapeutics, Inc. (NASDAQ:PTCT) have received downgrades from analysts among many other companies. To access a comprehensive list of stocks that have recently undergone downgrades by financial analysts, kindly refer to the complete article.
10. PFSweb, Inc. (NASDAQ:PFSW)
Price Reaction after the Downgrade: -0.01 (-0.13%)
Established in 1999, the company is based in Irving, Texas. PFSweb, Inc. (NASDAQ:PFSW) and its subsidiaries offer omni-channel commerce solutions in multiple countries, including the United States, Belgium, the United Kingdom, Canada, and India. Their services encompass order-to-cash processing, order fulfillment, and contact center support. The latter includes essential services like order entry, returns authorization, product inquiries, and order tracking. They also provide the iCommerce Agent application, enabling agents to assist customers with various functions such as placing orders, checking order status, facilitating returns, upselling, cross-selling, managing escalations, and gathering customer feedback. PFSweb, Inc. (NASDAQ:PFSW) serves clients across diverse industries, including health, skincare, fragrance, cosmetics, fashion, luxury goods, consumer packaged goods, collectibles, jewelry, housewares, electronics, and more.
On September 18, Craig-Hallum analyst George Sutton revised the rating for PFSweb, Inc. (NASDAQ:PFSW), downgrading it from "Buy" to "Hold." In conjunction with this adjustment, he also reduced the price target for PFSweb, Inc. (NASDAQ:PFSW) from $11 to $7.50. These decisions had an immediate impact, with PFSweb, Inc. (NASDAQ:PFSW) stock price experiencing a marginal decline of 0.1%, settling at $7.43.
09. Suncor Energy Inc. (NYSE:SU)
Price Reaction after the Downgrade: -0.21 (-0.60%)
On September 18, Suncor Energy Inc. (NYSE:SU) was downgraded by Desjardins from "Buy" to "Hold," with a current stock price of $34.88, reflecting a decrease of 0.6%. Suncor Energy Inc. (NYSE:SU) is being downgraded due to limited return potential to the revised target price of $49.00, up from $48.00, and a more cautious outlook on future M&A activity. Suncor Energy Inc. (NYSE:SU) stock surged by 10% after reporting second-quarter financial results in mid-August, ranking as the second-best performance in the Desjardins E&P coverage universe. CEO Rich Kruger's successful efforts in cutting costs and streamlining non-core assets, especially after the recent UK North Sea disposition, are noted. Operational improvements and favorable commodity prices have also been beneficial. However, ConocoPhillips' consolidation of Surmont potentially sets back Suncor Energy Inc. (NYSE:SU) Base Mine replacement plans as it nears its end-of-life in the mid-2030s, with production declines expected soon. The inevitable consolidation of TotalEnergies Canada's Fort Hills is expected, and SU may need to explore other M&A opportunities, possibly at richer valuations, given the altered oil sands landscape. Most of the near-term catalysts have materialized, and other Canadian large caps offer more promising short-term upside potential.
Artisan International Value Fund made the following comment about Suncor Energy Inc. (NYSE:SU) in its Q4 2022 investor letter:
“Suncor Energy Inc. (NYSE:SU), a Canada-based operator of oil sands mines, refineries and retail gas stations, was the third-largest contributor to return for the year, mainly due to higher oil prices. The share price increased by one third. Notably, the portfolio generated significant returns from energy stocks, including Suncor, Tenaris, Imperial Oil and tangentially Alimentation Couche-Tarde and Seven & i Holdings, both of which are in the gas station business. Given the cyclicality and commodity nature of the oil business, we have sold shares of these investments, including the complete sale of both Tenaris and Imperial Oil.”
08. Global Payments Inc. (NYSE:GPN)
Price Reaction after the Downgrade: -1.04 (-0.84%)
On September 18, Redburn-Atlantic analyst Kunaal Malde downgraded Global Payments (NYSE: GPN) from "Neutral" to "Sell" due to increased competition in the payment processing industry. The current stock price after the downgrade is $123.30, reflecting a decrease of 0.8%.
Artisan Mid Cap Fund made the following comment about Global Payments Inc. (NYSE:GPN) in its second quarter 2023 investor letter:
“Notable trims in the quarter included Global Payments Inc. (NYSE:GPN), Teledyne Technologies and Envista Holdings. Global Payments is a provider of payments technology solutions for merchants. Increased competition in the fintech sector has weighed on the company’s valuation since the pandemic. While we expect Global Payments to continue to grow its sales and profits, the slowing economy presents a risk over the coming year. In addition, the recent retirement of the CEO raises questions about the vitality of the company’s profit cycle. While the valuation remains attractive, we harvested a portion of our position in favor of newer ideas with more visible profit acceleration.”
07. Dropbox, Inc. (NASDAQ:DBX)
Price Reaction after the Downgrade: -0.38 (-1.41%)
On September 18, Dropbox, Inc. (NASDAQ:DBX) experienced a 1.4% decline in its share price following a downgrade by William Blair. In explaining his decision, Analyst Jason Ader pointed to several factors warranting caution, with one key concern being the "unimpressive outlook for organic revenue growth in 2024." Consequently, Ader revised his rating on Dropbox, Inc. (NASDAQ:DBX) from "Outperform" to "Market Perform." The downgrade by William Blair underscores the challenges and uncertainties that Dropbox, Inc. (NASDAQ:DBX) faces in the near future. While the company has enjoyed previous periods of growth and positive market sentiment, concerns about its revenue outlook for 2024 have prompted this reevaluation by the analyst.
Here is what Arch Capital specifically said about Dropbox, Inc. (NASDAQ:DBX) in its Q2, 2022 Investor Letter:
“In March, we decided to buy Dropbox, Inc. (NASDAQ:DBX) with some of our cash position. We had sold the stock in 2021 due solely to valuation concerns, but with the stock cratering in early 2022, we decided to revisit the company. It turns out, the business was still as strong as ever. If you want more detail on why we like Dropbox, you can read our report from back in Q1 here.”
06. NetApp, Inc. (NASDAQ:NTAP)
Price Reaction after the Downgrade: -1.55 (-1.99%)
Founded in 1992, NetApp, Inc. (NASDAQ:NTAP) is based in San Jose, California. It delivers cloud-centric data services globally, enabling data management and sharing across on-premises, private, and public clouds. The company operates in two segments: Hybrid Cloud and Public Cloud. NetApp, Inc. (NASDAQ:NTAP) offers intelligent data management software like NetApp ONTAP, storage infrastructure solutions including the All-Flash FAS series, and cloud storage and data services like NetApp Cloud Volumes ONTAP. They also provide application-aware data management via NetApp Astra and various professional and support services. Serving diverse industries, NetApp, Inc. (NASDAQ:NTAP) operates through direct sales and partner networks. On September 18, William Blair's Jason Ader downgraded NetApp (NASDAQ: NTAP) from "Outperform" to "Market Perform." Ader noted that NetApp, Inc. (NASDAQ:NTAP) cloud services have become a significant part of the business, contributing 8% of total revenue with cloud services ARR of $619 million and cloud revenue of $154 million in the most recent quarter ending July 31, 2023. However, despite doubling Cloud ARR over the past two years, growth has stalled in recent quarters, with Cloud ARR remaining flat sequentially and only increasing by 6% year-over-year in the latest quarter.
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Disclosure: None. Analysts on Wall Street Lower Ratings for These 10 Stocks is originally published on Insider Monkey.