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:
Learn more about the POWR Ratings
The Fly's recent reporting on these stocks includes:
On July 7, Spirit Airlines (SAVE) announced that it intends to reopen and immediately adjourn its Special Meeting of Stockholders relating to the proposed merger agreement with Frontier Group, parent company of Frontier Airlines, to allow the Spirit Board of Directors to continue discussions with Frontier and JetBlue Airways (JBLU) and to continue to solicit proxies from its stockholders. There will be no voting or other matters conducted at the meeting on July 8 and the company intends to reconvene the special meeting on July 15. In response, JetBlue issued the following statement from CEO Robin Hayes: "We are encouraged by our discussions with Spirit and are hopeful they now recognize that Spirit shareholders have indicated their clear, overwhelming preference for an agreement with JetBlue. We strongly recommend that Spirit shareholders continue to let the Spirit Board know they want to receive the superior value JetBlue has proposed, by voting AGAINST the Frontier transaction."
This week, Evercore ISI analyst Mark Mahaney lowered the firm's price target on Snap to $26 from $36 and kept an Outperform rating on the shares as he has "materially" cut estimates across the board in his Internet large cap coverage to account for high-cost inflation pressures, "fierce" foreign exchange headwinds, increasing signs of softening consumer demand and recession risk. Mahaney also lowered the firm's price target on Shopify to $560 from $660 and kept an Outperform rating on the shares.
In addition, Citi analyst Jason Bazinet lowered the firm's price target on Roblox to $46 from $52 and kept a Buy rating on the shares. Due to recession fears, most advertising and entertainment stocks have declined, Bazinet noted. However, the market has pressured firms with lower contractual revenue as much as they have punished firms with low EBIT margins, which is incorrect, the analyst contends. He lowered 2023 estimates on higher expense growth but left revenue estimates largely unchanged. Recession risks are "usually most acute for firms with high ad exposure and lower levels of contractual revenue," contends Bazinet.
Bazinet also lowered the firm's price target on AMC Entertainment to $5 from $6 and kept a Sell rating on the shares.
On July 5, Barclays analyst Ross Sandler lowered the firm's price target on Snap to $20 from $42 and kept an Overweight rating on the shares. Investors are "rightfully wary" about the trajectory of digital advertising growth in 2022, especially into Q2 earnings, Sandler said. The analyst believes a "perfect storm" is here given the step-down in spend and conversions across the whole internet ecosystem in Q2, an "ascending trajectory" from new challengers like TikTok and Apple, and the "obvious tough comps which are well documented." He thinks this "cocktail of events is likely to generate the lowest growth rates for the sector in years." However, stock valuations already reflect some of this, contends Sandler.
Meanwhile, JMP Securities analyst Andrew Boone initiated coverage of Shopify with a Market Perform rating and no price target. Shopify is entering a "major investment cycle" as it offers fulfillment services to merchants, which will limit its margin expansion and free cash flow generation, Boone stated. With that said, the analyst believes Shopify offers a "best-in-class commerce service" and he expects it to take share of merchants and overall commerce going forward.
Cronos Group
+0.03 (+0.96%)
Shopify
+0.12 (+0.34%)
Frontier Group
+0.315 (+3.03%)
AMC Entertainment
+0.36 (+2.49%)
Roblox
+1.915 (+4.85%)
Snap
-0.2 (-1.32%)
Wolfspeed
-2.125 (-3.04%)
ACV Auctions
+0.065 (+0.90%)
MicroStrategy
+2.23 (+1.01%)
StoneCo
-0.16 (-1.88%)
Lightspeed
-0.48 (-2.22%)
Recursion Pharmaceuticals
-0.05 (-0.56%)
Sana Biotechnology
+0.13 (+1.56%)
Spirit Airlines
+0.86 (+3.59%)
JetBlue
-0.16 (-1.90%)