A squeeze on the lower-income consumer, as shown by the reports last week by retailers, could be a wake-up call for the markets. Inflation keeps on rising, supply chain issues still haven’t been resolved, and the war in Ukraine seemingly has no end in sight.
Accordingly, with such a backdrop, stocks will have a hard time performing well, since numerous have been hit with downgrades and price target reductions.
Thus, Finbold has researched which stocks received price cuts from prominent analysts and identified two worth sharing.
Kraft Heinz (NASDAQ: KHC)
Kraft Heinz has been in the crosshairs of UBS analyst Cody Ross who downgraded the stock to a sell rating in a note to clients on Thursday, May 26. One of the main culprits for the downgrade is inflation and personal label competition; Cody summed up his view:
“KHC is battling one of the highest inflationary pressures in the next 12 months, increasing the need to take another round of their pricing this year, which we believe is unlikely in light of last week’s comments from WMT and TGT.”
The price has been cut from $40 to $34, with the bank expecting KHC growth and earnings to come below expectations in 2023. Shares of KHC are up slightly over 10% year-to-date (YTD); however, they lost over 7% for the month. More recently, the shares have been trading between the 50-day and 200-day Simple Moving Averages (SMAs).
Meanwhile, the consensus rating for the shares is ‘hold,’ with the average next 12 months’ price prediction at $42.18. The average price prediction is 6.84%, higher than the current trading price of $39.48.
Nutanix Inc. (NASDAQ: NTNX)
The cloud computing company managed to rack up a litany of downgrades today, with William Blaire kicking off the downgrade cycle. Several other equities analysts also cut their price targets and downgraded the stock, most notably Bank of America (NYSE: BAC), Piper Sandler, and Needham & Company.
Meanwhile, the company announced its Q3 earnings on May 25, beating revenues by $5.76 million and earnings per share (EPS) by $0.16. Despite beating earnings, most analysts cut their price targets from the low $40 to high $20’s.
In brief, the shares are down over 36% in the premarket session, now well below all daily SMAs. High sell volume has been noticed premarket as the shares are now trading at their all-time lows of $13.34.
For now, analysts have a moderate buy rating; however, this might change as more re-ratings come in for the stock. The average price prediction for the next 12 months is $30 per share, representing a 124% increase from the current all-time lows of $13.34.
Analysts tend to downgrade stocks when they have a strong conviction that a company is facing strong headwinds, which can affect profitability. Rising inflation and possibly poor sales have affected the above two stocks, whose outlooks don’t seem all that rosy in the short term.
Investors looking to get into a stock could benefit from looking at analysts’ ratings and understanding why a rating has changed to give themselves a better opportunity to pick the right stocks for their portfolios.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.