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 20, Alliance Global Partners analyst Aaron Grey lowered the firm's price target on Canopy Growth to C$8 from C$11 and keeps a Neutral rating on the shares ahead of Canopy reporting earnings next Friday. Grey has lowered his estimates amid continued market share losses and due to seasonality, he noted, adding that he will be interested in commentary on the company's U.S. strategy following its Jetty Extract purchase announced earlier this week.
The same day, Atlantic Equities analyst Edward Lewis downgraded Freshpet to Neutral from Overweight with a price target of $70, down from $130. The analyst believes the company has "ample capital" to fund its revised plan following the $350M equity offering but questions the need for it "to go so bold at this time." Lewis also sees more near-term volatility as Freshpet looks to deliver on pricing, ramp production and bring on new capacity. It makes more sense to take a step back and see how the company fares, "mindful that were it to come through this challenging period, there would be plenty of long term opportunity to go after in the shares," Lewis tells investors in a research note. He does not see a sufficiently attractive risk/reward in the share price at current levels.
Truist analyst Greg Miller lowered the firm's price target on GDS Holdings to $75 from $85, but keeps a Buy rating on the shares, stating that the company's Q1 results were indicative of the continued slow-down of much of the Chinese economy and a function of the zero COVID case tolerance policy of the central government amidst the dramatic rise in the latest variant. However, he also believes that China will see a recovery of an even greater magnitude than witnessed in the U.S. recently, the analyst tells investors.
MicroStrategy's new chief financial officer Andrew Kang has said the company's strategy to buy and hold bitcoin won't change despite the recent large selloff, Mark Maurer of The Wall Street Journal reported. As of March 31, MicroStrategy claimed to hold $2.9B of the cryptocurrency in book value and has bought 129,218 bitcoins to date. "At this time, we do not have any intention to sell," said Kang. "There are no scenarios that I'm aware we would sell." Kang claims there has not been any pressure from shareholders to sell more and added the company will continue to monitor bitcoin prices. "Some of the more recent volatility was certainly around some of the activity outside of bitcoin," Kang said. "For us, we monitor that from a market perspective, but there anything fundamental to bitcoin that we believe presents any issues against our strategy."
On May 18, Canopy Growth and Lemurian "Jetty," a California-based producer of cannabis extracts and pioneer of clean vape technology, announced that they have entered into definitive agreements providing Canopy Growth, by way of a wholly-owned subsidiary, the right to acquire, upon federal permissibility of THC in the U.S. or earlier at Canopy Growth's election, up to 100% of the outstanding capital stock of Jetty. Under the agreements, Canopy Growth will make aggregate upfront payments in the amount of approximately $69M payable through a combination of cash and Canopy Growth common shares, a majority of which will be Canopy Growth common shares, in exchange for approximately 75% of the equity interests in Jetty, subject to certain adjustments. Upon exercise of the rights to acquire up to 100% of the equity interests in Jetty covered by the first option agreement, Canopy Growth will make an additional payment pursuant to the terms of the agreements, also to be satisfied through a combination of cash and Canopy Growth common shares.
On May 17, Canaccord analyst Austin Moeller lowered the firm's price target on Rocket Lab to $16 from $28 and kept a Buy rating on the shares. The analyst feels that the company's mature, demonstrated orbital launch capability with the Electron, in addition to its improving contract win-rate in the Space Systems segment, gives Rocket Lab a substantial competitive edge relative to peers in the launch and smallsat manufacturing sectors.
The same day, Deutsche Bank analyst Edison Yu lowered the firm's price target on Rocket Lab to $14 from $18 and kept a Buy rating on the shares, arguing that the company's Q1 results were "somewhat messy" due to weaker margins but Q2 will show "meaningful improvement." Yu believes Rocket Lab remains on track to be one of the few publicly listed new space companies "that could actually be profitable in a few years."
Meanwhile, Mizuho analyst Dan Dolev lowered the firm's price target on SoFi Technologies to $9 from $14 and kept a Buy rating on the shares post the company's report of its Q1 results. After significant de-ratings of stocks, the second half of 2022 "could prove a boon for several companies" in the financial technology space, Dolev tells investors. The analyst believes the payments sector is attractive for the second halve of the year. If the economy holds, reaccelerating three-year-stack growth rates could result in positive stock reactions for numerous companies in the group, contends Dolev.
On May 16, George Soros' Soros Capital Management disclosed in an SEC filing its holdings as of March 31, 2022. The fund reduced its stake in 10 holdings, including by size of previous position Booking Holdings (BKNG), Microsoft (MSFT), Amkor Technology (AMKR), Constellation Brands (STZ), GoDaddy (GDDY) and Cyxtera Technologies (CYXT). Soros Capital's top holdings as of March 31, in order of size, were Ranpak Holdings (PACK), SPDR S&P Oil & Gas Exploration & Production ETF, Suncor, Mosaic and Devon Energy.
The same day, Piper Sandler analyst Kevin Barker upgraded SoFi Technologies to Overweight from Neutral with a price target of $10, down from $12. The stock has sold off 70% in the past six months as the combination of an extension of the student loan moratorium, rising interest rates and heavy pressure on fintech stocks have weighed on shares, Barker said. The analyst believes the market is now "over-discounting" SoFi with the company poised to show a "significant ramp" in EBITDA in the second half of 2022 and into 2023. The combination of rapid growth in deposits, the expiration of the student loan moratorium, and revenue growth in the financial services segment should lead to significant earnings momentum throughout 2023 and 2024, stated Barker.
Meanwhile, Jefferies analyst Brent Thill keeps a Hold rating on MicroStrategy with a $225 price target, saying the shares are down 50% this month as investors have been concerned about its $2.4B in leverage. He believes MicroStrategy does not face liquidity risk as it has enough free cash flow to cover debt interest and does not face solvency risk as it can use additional bitcoins for collateral to avoid a margin call in the near-term. Management needs to focus on the core business that declined 3% in Q1m says Thill, who remains on the sidelines pending better execution.