Each week, The Fly will announce the newest downgrades to Strong Sell in StockNews.com's POWR Ratings algorithmic model.
This Fly exclusive recap identifies stocks with over a $1B market capitalization that have been downgraded this week to the Strong Sell, or "F," rating in the service's proprietary model that analyzes 118 different factors, each of which contribute a little to the stock's predicted likelihood of underperformance. A bell curve distribution of StockNews.com's ratings shows that only the top 5% of the over 5,000 stocks rated by the system are assigned a "Strong Buy," or "A," rating while the bottom 5% are assigned a Strong Sell. The F-rated stocks would have tumbled an average of 18.98% a year since 1999, according to StockNews.com.
This week's downgrades to Strong Sell as determined by the POWR Ratings algorithm:
The Fly's recent reporting on these stocks includes:
On May 12, Mizuho analyst Dan Dolev lowered the firm's price target on Block to $135 from $215 and kept a Buy rating on the shares. The analyst says the company's "over-association with Bitcoin is a shame." Tagging Block as a "crypto stock" has prevented the stock from benefiting from strengthening fundamentals, Dolev tells investors. He believes that since bitcoin accounts for less than 5% of Block's gross profit it should not drive sentiment. To fix this issue, Block "must decouple the story from Bitcoin so that its best-in-class fundamentals can finally shine again," said Dolev.
The same day, JPMorgan analyst Pablo Singzon reiterated an Overweight rating on BRP Group with a $32 price target, saying the selloff post the Q1 results had been overdone. BRP's leverage limits its ability to pursue acquisitions and increases its risk profile, but he believes these factors are more than adequately reflected in the stock's discount valuation, Singzon told investors. The analyst also does not view a temporary pause or pullback in M&A as a negative for BRP.
Meanwhile, KeyBanc analyst Todd Fowler lowered the firm's price target on TuSimple to $30 from $40 to reflect a slightly slower near-term ramp in carrier-owned capacity, a higher discount rate, and a greater likelihood for additional capital. The analyst keeps an Overweight rating on the shares, noting that TuSimple hosted what he considered a well-structured investor day with a clear focus on achieving initial commercialization by late 2023 and a full-scale autonomous freight network - including fully integrated, purpose-built vehicles - by mid-2025.
On May 11, Aurora Innovation and Covenant Logistics Group (CVLG) announced a collaboration to explore ways to optimize Covenant's long-haul operations with Aurora's autonomous trucking product. The two companies will explore the integration and deployment of Aurora Horizon within Covenant's operations, the companies stated.
Earlier this week, the Beauty Health Company announced a "blockbuster" new HydraFacial partnership with JLo Beauty. The Hydrafacial x JLo Beauty Booster "features a unique combination of potent ingredients including a tri-fermented essence, super antioxidants and niacinamide which will leave skin plump, healthy-looking and glowing like never before," the company said.
The same day, Canaccord analyst Kyle Rose lowered the firm's price target on Beauty Health to $22 from $27 and kept a Buy rating on the shares. The analyst views the company as a terrific example of a "category creator" within MedTech that is leveraging its existing technology platform, brand, and market insight to address an overlooked market segment.
Wells Fargo analyst Jeff Cantwell lowered the firm's price target on Flywire to $36 from $41 and kept an Overweight rating on the shares. The analyst notes the company reported relatively strong results in Q1, Q2 guidance was above expectations, and full year 2022 guidance was increased. However, given the current market environment, Cantwell expects the shares' reaction to be relatively muted given his sense is investors were expecting a bigger raise in guidance and adjusted gross margin declining noticeably versus last year.
Earlier in the week, Piper Sandler analyst Peter Keith downgraded Wayfair to Neutral from Overweight with a price target of $65, down from $200. The analyst says he can no longer defend shares as the sales outlook and market share dynamics are uncertain. Wayfair's EBITDA losses for 2022 "could be meaningful" and negative free cash flow for the year looks likely as expenditures step up, Keith tells investors in a research note. He believes investors have no patience for negative EBITDA and negative free cash flow companies in the current environment.
Meanwhile, Truist analyst Naved Khan lowered the firm's price target on Wayfair to $130 from $190 after its Q1 earnings miss, but keeps a Buy rating on the shares. Macro headwinds and a shift in consumer spend to reopening categories are likely to keep the company's growth challenged in the near term, causing higher expenses to weigh on margins, but gains in driving repeat orders and Wayfair's product margins "look sticky", the analyst tells investors. Khan adds that Wayfair looks positioned for continued share gains and return to above-industry growth rates.