The S&P 500, Nasdaq and Dow Jones industrial average have all entered correction territory within the past month, and investors took the brunt of this. Savvy investors rotated their money into more defensive names quickly, and there has been some run-up in them. However, more investors are in the process of reallocating their portfolios and picking stock they think will be big winners going forward as things hopefully wrap up in Eastern Europe.
While the Russia-Ukraine conflict is underway, markets are taking in information about all the potential global ramifications and analysts are weighing in on what to buy for now and in the future. Again, defensive stocks, energy stocks and gold have been good stays of value in the meantime, but as this crisis is exited, portfolios inevitably will shift again.
Analysts have been issuing calls as long as the market has been around, and most of the time these calls are either reiterating the status quo and maybe lifting or dropping the price target, or they are making an upgrade. Much less often, analysts downgrade stocks and tell investors to stay away.
With markets in correction territory, there is definitely a solid value proposition for many stocks, but there are some stocks that are value traps and could even blow up a portfolio. Here, 24/7 Wall St. looks at a few companies that analysts are saying to avoid. In this case, a few big biopharma names.
After reviewing the company’s model, and then some, UBS downgraded shares of AbbVie Inc. (NYSE: ABBV) to Neutral from Buy. Considering the stock’s current valuation and near-term pipeline opportunities, the firm is struggling to find further upside in the model. In the near term, the Phase 1/2 readout for the cystic fibrosis triplet could be bullish. However, UBS’s review of the data and the high bar set by Vertex Pharma gives the firm a low conviction that this study can deliver and then be competitive.
AbbVie stock closed Monday’s session at $147.77, in a 52-week trading range of $102.05 to $150.36. The stock is up over 9% year to date, and analysts have a consensus price target of $150.53.
Barclays has downgraded Deciphera Pharmaceuticals Inc. (NASDAQ: DCPH) to an Underweight rating from Equal Weight, and the analyst cut the $11 price target to $6. That implies downside of 22% from the closing price prior to the call. The firm noted that while Deciphera’s lead drug has a favorable safety and efficacy profile compared with existing and emerging drugs, Barclays is waiting to see improved commercial uptake in 4L gastrointestinal tumors.
The stock most recently closed at $7.71, and it has a 52-week trading range of $7.13 to $48.27. The share price is down over 21% year to date. The consensus analyst price target is $10.67.
When BMO Capital lowered its Outperform rating on Gilead Sciences Inc. (NASDAQ: GILD) to Market Perform, it also reduced the price target from $75 to $65. The firm cited expectations around a base-case of statistically significant, but not clinically meaningful, progression free survival (PFS) for the TROPiCS-02. BMO sees an increasingly challenging narrative around the outlook for growth in the oncology franchise. While the firm is not necessarily negative on the name as the rating suggests, it views this stock as a “show me” story.
Note that TROPiCS-02 is in a Phase 3 study evaluating the efficacy and safety of sacituzumab govitecan-hzi versus treatment of physician’s choice for metastatic breast cancer.
Gilead stock has a 52-week trading range of $59.18 to $74.12, and it traded at $60.40 on Monday’s close. Shares are down nearly 17% year to date. Analysts have a consensus price target of $74.32.
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