It has been impossible not to notice a marked increase in Underperform and Sell ratings emerging from the top firms on Wall Street. When you have a 30% market increase that is immediately followed by a 6% downdraft right after the new year starts, some firms start to look for stocks that need to be taken off the table. As we have pointed out recently, some names are simply fully valued. With other names, something may be broken and will not be fixed anytime soon.
In a new daily research report, the Merrill Lynch analysts again encourage investors to sell certain stocks that had been big favorites in the past. In an odd twist, while they keep many of the names as Sell-rated but lift their price targets. In some cases, the targets are raised dramatically. Here are additional names that are Sell-rated at Merrill Lynch.
BlackBerry Ltd. (NASDAQ: BBRY) has been circled by short sellers for years. Despite countless efforts to reboot the company, the smartphone revolution has knocked the company from former lofty heights to single digits. Short sellers covered 14,193,136 shares, or 13.2% of the outstanding shares sold short, in January. The Merrill Lynch price target for the stock is $6. The Thomson/First Call consensus price target for the stock is $7.15. BlackBerry closed Friday at $8.98.
Burger King Worldwide Inc. (NYSE: BKW) recently beat fourth-quarter earnings estimates, but it missed on revenues. Even though Burger King posted higher earnings in the quarter, its revenues have been soft due to difficult consumer discretionary environment in the United States. Government budget cuts, high tax rates and still-tightened credit availability continue to hurt consumers’ discretionary spending. Investors are paid a 1.1% dividend. The Merrill Lynch price target goes from $18 to $20. The consensus estimate is at $25.78, very close to where the stock closed Friday at $25.63. This could simply be a valuation call.
Entergy Corp. (NYSE: ETR) is also a stock to Sell at UBS and hit its list recently. The company has decided to stay the course with its nuclear power plants, and that does not sit that well with the UBS team. Possible litigation risks and the always possible nuclear accident risks are outweighing the positive dividend and demand for energy. Investors are paid a 5.3% dividend. Merrill Lynch raised its price objective from $60 to $62. The consensus target is $63.13. Entergy closed Friday at $64.49.
Goodyear Tire & Rubber Co. (NASDAQ: GT) may also be a straight valuation call. The stock roared last week on the back of good earnings. With bad weather severely slowing new car sales, and the stock very close to 52-week highs, the logic is there. Much of Wall Street does not seem to agree. Investors are paid a tiny 0.7% dividend. The Merrill Lynch target is raised again from $11 to $18. The consensus target is $27.20. Goodyear closed Friday at $26.76.
Lexmark International Inc. (NYSE: LXK) is another name that has slowly, but surely, lost its cache as an industry leader. Once one of the premiere names in high-end printers, the company continues to lose market share. It also has very little to offer in terms of innovation and new and exciting products. The stock does pay shareholders a solid 2.9% dividend. The Merrill Lynch price target is $31, and the consensus price target is $31.75. That is far below Friday’s closing price of $41.12.
Molson Coors Brewing Co. (NYSE: TAP), like many beer companies, has seen beer consumption drop in favor of wine and liquor. The only standout in the recent poor numbers was an increase in sales of “above-premium beers.” Despite a new brewer opening up almost every day in the United States, Molson Coors accounts for nearly one of every three additional brews sold at the craft-brew level. Shareholders are paid a 2.7% dividend. Merrill Lynch lifts the price target from $50 to $52. The consensus target is $58.25. The stock closed Friday at $55.02.
We will continue to track the major firms on Wall Street for their Sell ratings. The sooner we can get that information to our readers, the better. Big institutional clients often get the reach around when it comes to rating changes, the smaller investors are not quite as lucky. That is a practice not likely to change anytime soon.