Investing

How Deep Will the Coronavirus Reratings of Top Stocks Go?

Jon C. Ogg

Published: March 12, 2020 11:28 am

Last Updated: March 12, 2020 12:08 pm

In times of a market panic, many investors hope that things don’t get worse and they hold on to where things were before the mudslide knocked the bottom out of the market. Unfortunately, that’s not reality. When share prices and asset prices drop substantially, the old prices no longer matter and sellers need to keep in mind that new buyers have no care what price you originally paid. This will have a direct translation to analyst calls from Wall Street brokerage firms, now that the stock market has formally pulled back enough that it’s considered a bear market.

24/7 Wall St. reviews dozens of analyst upgrades, downgrades, reiterations and initiations each day of the week. This ends up being hundreds of analyst calls each week. During the panic selling of March 2020, many stocks have seen their target prices drop so fast that it’s quite easy to find stocks that have fallen 15%, 20%, 25% or more from just a month ago. Many instances are even far worse than that.

Analysts on Wall Street often get a bad reputation during sell-offs because their price targets and ratings do not usually come down ahead of bad news or ahead of a serious correction like we have just seen. Consider that Jerome Powell and the members of Federal Reserve were noting how resilient and strong the economy was just three or four weeks ago. Yet, a week earlier, they executed an emergency interest rate cut of 0.50%. It usually takes analysts some time to go over the damage that is taking place, and often it is hard to get accurate information about a live situation (see ISM business comments from yesterday).

While no one can really tell you where the bottom is, and while no one can tell you how long the coronavirus will be around, it seems easy to expect that many analyst target prices of the major market darlings are going to come down. It also seems reasonable to expect that those target prices won’t all come down at once, even if the formal analyst ratings are maintained as Buy and Outperform.

While this is simple math, the perpetual market dilemma is painful while it is happening: a drop of 20% takes a 25% rally to get back to even, a drop of one-third takes a 50% rally to come back, and a drop of 50% requires a 100% rally from the bottom just to get back to even. That is why it often takes so long for a bear market to see a return to the former highs.

Here are 10 market darlings that simply could not get enough love just a month ago but in which the share price has come down drastically and investors should expect the target prices to fall in the coming days and weeks. To show how much froth had come into these stocks, we have included the current consensus analyst target price from Refinitiv versus the consensus target at the end of 2019. After all, that was barely 70 days ago.

Advanced Micro Devices Inc. (NASDAQ: AMD) was a stock that simply could do no wrong in 2019 and in prior years. It reached a new high of $59.27 just in mid-February, but it was last seen down over 8% at $42.00. AMD’s consensus target price was last seen at $50.34, but the consensus target was just $37.77 at the end of 2019.

Alphabet Inc. (NASDAQ: GOOGL) was trading down 5% at $1,145.00 on Thursday, and that is down from a high of $1,530.74. Its consensus target price was still up at $1,612.87, versus a $1,472.28 consensus target at the end of 2019.

Amazon.com Inc. (NASDAQ: AMZN) was trading down over 5% at $1,722.50, down from a high of $2,185.95. Its consensus target price was still $2,404.40 on last look, versus a consensus target of $2,167.56 at the end of 2019.

Apple Inc. (NASDAQ: AAPL) was down over 5% at roughly $259.00. Its prior high was $327.85, but its consensus target price was still $331.20, even after some recent target cuts. Apple’s consensus target at the end of 2019 was $266.22.

JPMorgan Chase & Co. (NYSE: JPM) was down about 8% at $88.24. Its shares have a high of $141.10, and the consensus target price was still up at $136.17 on last look, up from a consensus of $128.58 at the end last year.

Microsoft Corp. (NASDAQ: MSFT) was down about 5% at $145.50 on Thursday, down from a high of $190.70. Its consensus target price was $193.75. It was just $163.63 at the end of 2019.

Nike Inc. (NYSE: NKE) was down about 9% at $76.20 on Thursday, down from a recent high of $105.62 (Jan. 22). Its consensus target price was $109.73 on last look, but it was $108.98 at the end of 2019.

Nvidia Corp. (NASDAQ: NVDA) was last seen trading down about 6% at $231.03 on Thursday, compared with a high of $316.32 (Feb. 20). The consensus target price was $303.15 on last look, but at the end of 2019 it was just $236.32, and the 2019 year-end share price was $235.30.

Visa Inc. (NYSE: V) had seen its shares rise endlessly, but its drop of 6% to $162.50 on Thursday is down from a high of $214.17. The most recent consensus analyst target was still up at $227.09. Visa’s 2019 year-end share price was $187.90, and its consensus target then was $203.43.

Walt Disney Co. (NYSE: DIS) was also in a position that it could do no wrong around the time of its Disney+ launch, but the coronavirus crushes its business at parks, movies and cruises/hotels. The shares were down 8% at $97.00 on Thursday, down from a high of $153.41. Disney’s consensus target price was still up at $157.71 this week, very close to the consensus figure of $156.28 at the end of 2019.

Many other stocks could have been featured as well, but the target prices have been all over the place, so much so that it would make comparing any current prices to current or recent consensus target prices largely irrelevant. Just some of those would be Boeing, General Electric, Netflix, Roku and Tesla.