Now that the bull market is more than eight years old and many of the pro-growth policies out of Washington may be muted or delayed, many investors are wondering how they should be investing their money. Stocks are very close to all-time highs, and investors have seen buyers step in and buy stocks on every single pullback.
24/7 Wall St. reviews dozens of analyst research reports each day of the week in an effort to find new investing and trading ideas for our readers. This becomes hundreds of analyst reports each week. It is rather common to hear analysts telling their clients to buy many stocks. What is far less common is when an analyst says to sell a stock.
After reviewing the weekly tally of analyst calls from the week of May 15 to May 19, it turns out that analysts issued many new Sell and Underperform equivalent ratings on some rather well-known stocks. Having a Hold or a Neutral rating may mean a valuation is fair or that the good news is baked in. Still, Sell ratings can spook investors.
It is important to understand that one analyst may have a Sell rating at the same time another analyst says to buy a stock. That is what makes a ball game. It also does not assure that a stock is about to fall off a cliff. For a reference on a contrast between Buy/Sell, in some manners it is no different than when a very popular stock that is loved by analysts and investors is also heavily targeted by short sellers.
24/7 Wall St. included color on each Sell equivalent rating from this past week. Other data, including the sell-side consensus analyst price target from Thomson Reuters and trading history, were also included.
These were the top 10 Sell ratings seen from analysts during the week of May 15 to May 19, 2017.
Acceleron Pharma
Acceleron Pharma Inc. (NASDAQ: XLRN) was started with a Sell rating and assigned a $20 price target at Goldman Sachs on May 17. While this was not a “screaming sell” rating, the firm sees a lack of meaningful upside catalysts for the next year and that any positive drug upside is more than priced into the stock.
While this was an initiation rather than a downgrade, that $20 target compares with a $30.30 prior closing price, which implies shares were ready to lose one-third of their value. Acceleron shares were trading at $25.56 on Friday’s close.
CenturyLink and Level 3
CenturyLink Inc. (NYSE: CTL) and Level 3 Communications Inc. (NASDAQ: LVLT), with the former in the process of buying the latter, were both downgraded to Underperform from Market Perform at Raymond James on May 15. That’s the firm’s version of a Sell rating, and it believes that investors may throw in the towel here and see lower rather than higher post-merger growth at Level 3.
The only good news here about such negative ratings is that CenturyLink shares hardly budged on the call. After closing at $24.63 the prior day, they managed to close at $24.81 after the downgrade. The stock closed at $24.87 on Friday. One other thing about CenturyLink was that activist hedge fund Corvex Management recently took stake in it.
Church & Dwight
Church & Dwight Co. Inc. (NYSE: CHD) was downgraded to Underweight from Equal Weight at Morgan Stanley on May 16. This is Morgan Stanley’s version of a Sell rating. Church & Dwight shares were indicated down 0.6% at $49.95 on Tuesday after the call, and the stock ended the week at $49.74 a share.
One problem that the stock faces, despite being among the “defensive” stocks under a consumer products label, is that its valuations have generally been far higher than its larger rivals. The 52-week trading range is $42.56 to $53.68, and the consensus analyst target price was $49.81 on Friday.
Pfizer
Pfizer Inc. (NYSE: PFE) was downgraded to Sell from Neutral with a $31 price target at Citigroup on May 16. The stock was indicated down 1.8% at $32.53 on Tuesday morning as a result of the rating, but the stock was trading up nearly a quarter at $32.46 on Friday’s close. This downgrade took Pfizer’s consensus target price down from $37.89 ahead of the call to $37.53 at the end of the week.
Pfizer has a 52-week range of $29.83 to $37.39, but at least it has close to a 4% dividend yield, now that the share price has been muted with close to being unchanged so far in 2017.
Plug Power
Plug Power Inc. (NASDAQ: PLUG) is no stranger to volatility, and on May 17 Roth Capital downgraded it to Sell from Neutral with a $1.30 price target. The close on May 16 was $2.04, and Plug Power shares closed at $1.76 on the heels of the downgrade — only to be at $1.97 again later in the week. Roth believes that the Amazon pact may in reality have a negative impact rather than be a huge boost.
Plug Power shares have traded between $0.83 and $2.70 in the past year.
24/7 Wall St.Zimmer Biomet
Zimmer Biomet Holdings Inc. (NYSE: ZBH) was started with a Sell rating and assigned a $92 price target at Goldman Sachs on May 16. Its shares were at $122.33 ahead of the call and fell to $119.78 afterward. On Friday its share price closed down at $117.67, while the consensus target price was up at $132.05.
And the Rest
Other key Sell and Underperform calls were seen in the following last week:
Buckle Inc. (NYSE: BKE) was downgraded to Sell from an already cautious Hold rating at Deutsche Bank on May 19. This stock closed at $17.40 the prior day and closed down more than 3% at $16.85 on Friday. It has a 52-week range of $16.00 to $28.67 and a consensus target price of $19.67.
NantKwest Inc. (NASDAQ: NK) was downgraded to Sell from Neutral with a $3 price target by Citigroup on May 16. Shares traded at $4.60 on May 15 and slid throughout the week. The stock was down more than 7% at $3.46 when trading closed on Friday. The consensus analyst target is $6.00, and the 52-week range is $2.71 to $9.60.
W.W. Grainger Inc. (NYSE: GWW) was downgraded to Sell from Hold with a $145 price target at Deutsche Bank on May 18. Grainger shares closed at $179.10 on May 16 and then fell to $174.77 a day ahead of this downgrade. Grainger shares then closed at $173.30 after the call, but the stock was back above $175.00 late on Friday. The 52-week range is $170.21 to $262.71, and the consensus price target is $200.95.
24/7 Wall St.And for one bonus in cybersecurity (with a loose definition of bonus):
Symantec Corp. (NASDAQ: SYMC) was not exactly given Sell ratings this past week, but its share performance after downgrades makes it feel like the old negativity was back in play, despite Symantec claiming that it blocked millions of WannaCry instances. This would have marked the 11th “stock to sell,” but it technically was not given new formal Sell equivalent ratings this week, despite a prior Underperform rating from Merrill Lynch. Analysts took a very mixed stance the prior week after earnings. RBC Capital Markets downgraded Symantec to Sector Perform from Outperform on May 19, on May 18 UBS downgraded it to Neutral from Buy with a $33 price target.
Symantec closed at $31.01 on Friday, May 12, and closed up at $32.00 last Monday after the WannaCry security pop. What hurt so bad here is that Symantec’s stock price sold off each day of the week thereafter. It was down to $29.02 on Friday’s close. Symantec has a 52-week range of $16.83 to $33.22 and a consensus price target of $32.79.
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