Like any other item in the world, when a stock gets too expensive you just don’t want to buy it. The higher the market pushes, the more we see high-profile names being marched out to the analysts’ chopping block. We have seen a marked increase in the number of stocks being cut to Underperform or Sell, and some of them have been the darlings of momentum traders for the past couple of years.
At 24/7 Wall Street, we are running weekly screens across our Wall Street research coverage, looking for any and all new additions to the analysts’ Sell lists. The surge in the market to record highs on the S&P 500 and 13-year highs on the Nasdaq seems to be one reason for the higher count in the ratings changes. Plain and simple, many Wall Street analysts think some of the stocks in their coverage universe are fully valued.
Here are the new analysts Sell and Underperform ratings to hit our screens this week.
Groupon Inc. (NASDAQ: GRPN) posted numbers that at first glance looked solid, and then investors read the press release in full and the company said it was projecting a loss for the coming quarter. This was surprising, since revenue guidance was $50 million more than expected. So, the company is closing more business but making less money. RBC did not like the surprise and cut the stock to Underperform. The firm put a $6 price target on the stock. The Thomson/First Call estimate is at $11.30. Groupon closed Monday at $7.78.
L Brands Inc. (NYSE: LB) catches a downgrade at Oppenheimer to Underperform. Brean Capital joined in last week, lowering its price target on the stock ahead of fourth-quarter results on expectations of severe weather impact, weak traffic patterns and sluggish consumer spending. The firm maintained their Buy rating. Oppenheimer is much more negative and has a $46 price target for the stock. The current consensus target is $60.22. L Brands closed Monday at $53.78. Investors are paid a 2.5% dividend.
Netflix Inc. (NASDAQ: NFLX) has been the poster boy for the momentum stock traders club. The company recently announced huge deals that would keep its programming streaming smoothly on Comcast, and more deals look to be in the works. Merrill Lynch is unimpressed, and trading at 241 times earnings, it is easy to see why. This is a straight valuation call. The firm rates the stock at Underweight and has a look-out-below $226 price target. The consensus is much higher at $375.11. Netflix closed Monday at $447.00.
Panera Bread Co. (NASDAQ: PNRA) has been another momentum player’s delight over the past couple of years, and in the process mauled most of the short sellers. Piper Jaffray thinks the run may be over, and it has cut the stock to Underperform. Management has already stated that the current year’s first 48 days’ same-store sales remain weak — down 2.2% year over year. The Piper Jaffray price target is $137. The consensus target is $180.35, but Panera closed Monday at $184.41
Sears Holdings Corp. (NASDAQ: SHLD) has been in a slow, but sure death spiral for the past couple of years. The department-store chain is struggling to attract shoppers and shake off a reputation for dilapidated stores. The company has posted 27 straight quarters of falling revenue, and there is no reason to think things will get better anytime soon. The Credit Suisse price target for the Underperform-rated Sears is $20. The consensus target is close by at $22.50. Sears closed Monday at $38.05.
Strayer Education Inc. (NASDAQ: STRA) has long been a favorite target for the short sellers. The company beat estimates last week, but that was not enough to convince Deutsche Bank or Piper Jaffray. Both firms have the stock rated at Underperform, and both firms posted a $40 price objective. The consensus on Wall Street is right in line at $40.33. Strayer closed Monday at $47.26.
VIVUS Inc. (NASDAQ: VVUS) has apparently started to wear out its welcome on Wall Street. Although most firms agree its obesity drug is the best, the company cannot find a partner, and sales are disappointing. With competition from two other companies, things are not going to get any easier. Merrill Lynch (and other firms Tuesday) moved the stock to Underperform. The firm has a posted $6 price target. The consensus target is $11.30, so something has to give. The stock ended Monday at $6.75.
The market rocketed to new highs Monday, but near the end of the day a large amount of the gain was given back. That shows that traders are getting a little nervous, and they are very quick to pull the trigger and take profits. With geopolitical issues bubbling around the world, and the Chinese apparently letting their currency swan dive after months of gains, better safe than sorry may be the current mantra.
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