Investing

Key Analyst Sell Ratings: Arch Coal, IBM, Domtar and More

After hitting new all-time highs just a week ago, both the Dow Jones Industrial Average and the S&P 500 came under pressure this past week. And the carnage in the Nasdaq and momentum stocks was far worse. 24/7 Wall St. tracks many analyst research reports each day, and there were many Sell, Underweight and Underperform ratings issued by Wall Street last week.

Some Wall Street firms list a Sell rating by the term Underperform or Underweight, but they are generally considered as the same — a trinity of sorts in the investment community. At least no Strong Sell ratings seen, which are generally very rare.

Now that stocks have sold off from their all-time highs, investors have decided that they better be very careful. After all, who wants to get caught in the next major stock implosion or market correction?

These were this past week’s big Sell ratings issued by Wall Street analysts.

American Eagle Outfitters Inc. (NYSE: AEO) was downgraded to Underperform by Cowen and Co. on Monday. The price target was moved to $11 in the call, which was versus close to $12.75 prior to the call. Shares were down under $11.40 late in the week.

UBS delivered coal in your holiday stockings, but in April. Arch Coal Inc. (NYSE: ACI) and Alpha Natural Resources Inc. (NYSE: ANR) were both part of a coal sector downgrade on Wednesday from UBS, where the sector was slashed to Sell from an already cautious Neutral rating. Arch Coal at least remains way above our entry price when it was named one of nine stocks that could double in 2014, but the downgrade brigade of late has been nearly impossible to ignore.

Conversant Inc. (NASDAQ: CNVR) was downgraded to Sell from Neutral at Goldman Sachs on Monday. The digital marketing company was handed a $23 price target, down from around $27 before the call, and lower still than the $25.50 price going into Friday.

Domtar Corp. (NYSE: UFS) was downgraded to Sell from an already cautious Neutral rating at Citigroup on Tuesday. Domtar’s price target was cut to $90 from $106, and shares fell by almost 4% on the news, after previously trading at $106.72 before the downgrade. Shares have traded in a 52-week range of $65.01 to $115.75.

Dr. Pepper Snapple Group Inc. (NYSE: DPS) was downgraded to Underperform at Wells Fargo on Tuesday and the valuation was put at $46 to $48 on the stock. The firm is more concerned with its position in a competitive space with margin pressure. The firm called it a peak valuation. Shares fell almost 4% to $51.62 on the downgrade on Tuesday. Shares had been at $54 prior to the downgrade, and the stock was at $52 late in the week.

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International Business Machines Corp. (NYSE: IBM) was reiterated as Underperform and with a $160 price target at Credit Suisse ahead of next week’s earnings report. IBM’s earnings quality remains poor, even if it has a low P/E ratio. The buybacks, followed by continued cost cuts, are the only thing adding to that earnings per share goal of $20 for 2015. Shares were around $195 in early Friday trading ahead of the weekend.

Realty Income Corp. (NYSE: O) managed to ignore a new Underweight rating on Tuesday. The report was from Morgan Stanley, and the price target was down at $38, versus a $41.51 prior close. Interestingly enough, Realty Income rose on Tuesday by almost 1%. Shares were around $41.30 late in the week. Maybe some downgrades do not matter after all.

Statoil ASA (NYSE: STO) was downgraded to Sell from Neutral by Goldman Sachs on Monday. The ambition here was that weak European gas prices are bringing up an earnings risk, particularly as the stock has outperformed its European peers since last fall.

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