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 23, Bernstein analyst Nikhil Devnani initiated coverage of Wayfair with an Underperform rating and $45 price target. The analyst is negative on the stock in the near term, as he believes the pandemic pulled forward demand, which now leaves growth challenged by tough comps. He also feels consensus EBITDA expectations are too optimistic, and noted that inflation is pressuring the gross margin.
About a week prior, a company spokesperson told Bloomberg that Wayfair is freezing corporate hiring for 90 days as it sees "a great deal of uncertainty in the overall economy," though the company is in a "strong position."
On May 18, Wells Fargo analyst Michael Turrin lowered the firm's price target on Confluent to $35 from $45 on multiple compression across software. The analyst keeps an Overweight rating on the shares.
A few days prior to that, Stephen Mandel's Lone Pine Capital disclosed in an SEC filing its holdings as of March 31, 2022. Lone Pine made eight new buys during Q1, including by size of position, TSMC (TSM), Meta Platforms (FB), Atlassian (TEAM), Dick's Sporting Goods (DKS), Bill.com (BILL) and Thermo Fisher (TMO). The fund exited eight positions during the quarter, including by size of previous position, KE Holdings (BEKE), Adobe (ADBE), Snowflake (SNOW), NetEase (NTES), Confluent (CFLT) and PVH Corp. (PVH).
On May 18, JMP Securities analyst Ronald Josey lowered the firm's price target on ACV Auctions to $20 from $32 but keeps an Outperform rating on the shares. The company's Q1 earnings were mixed with below-consensus EBITDA and its guidance was "disappointing", but the wholesale market will eventually improve as car companies adapt to supply chains challenges, the analyst tells investors in a research note. At 1.4-times expected 2023 revenue, ACV's risk/reward is one of the most favorable in his coverage universe, Josey adds.
On May 25, Raymond James analyst Brian MacArthur removed NexGen Energy from the firm's Analyst Current Favorites List. The analyst, who made no change to his Outperform rating, continues to like the outlook for uranium and NexGen, but cites recent market volatility for the removal from the ACF list.
On May 23, Jefferies analyst Brent Thill lowered the firm's price target on MicroStrategy to $215 from $225 and kept a Hold rating on the shares. Thill lowered forecasts across 28 software companies he covers given stiffening economic headwinds and the looming risk of recession and the multiples embedded in his new price targets are 25% lower, though he warns investors that he believes there could still be downside to multiples if fundamentals weaken further.