A long holiday weekend did not slow markets from their search for the bottom, as Monday saw stocks retreat further into the red. Monday’s fall-off really only solidifies more investors’ concerns that we are already in a recession, and Wall Street seems to agree. In fact, one major brokerage firm thinks that even considering this turn lower, there are some stocks to steer clear of in the near future.
Wedbush has issued a few calls with a focus on the banking and finance industry. Each call is moderately positive, forecasting slight upside in both the near and long term. However, there are concerns within the industry about what the Federal Reserve plans to do and how it will ultimately impact the economy.
While headwinds have put a damper on the markets in general over the past few months, Wedbush believes that a couple of these stocks could provide some upside in the coming months and years.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Wedbush’s David Chiaverini downgraded SVB Financial Group (NASDAQ: SIVB) from Outperform to Neutral. The $450 price target implies upside of 12% from the most recent closing price of $402.56.
Chiaverini sees slowing growth in a recessionary environment and believes SVB’s end markets could be disproportionately affected, including venture capital-backed backed companies in the high-tech and biotech industries. It appears that we are roughly six months into an 18 to 24 month downturn, given the significant amount of liquidity being withdrawn from the banking system by the Federal Reserve and the resulting negative impact this could have on the economy, including lower loan growth and higher credit costs for banks.
The stock traded around $390 on Tuesday, in a 52-week range of $374.99 to $763.22. Shares are down over 41% year to date.
Peter Winter was the lead analyst on this call. He downgraded Huntington Bancshares Inc. (NASDAQ: HBAN) from Outperform to Neutral with a $14 price target. That implies upside of 14% from the most recent closing price of $12.24.
Winter also removed the stock from the Wedbush Best Ideas List, based on concerns about the increased risks of recession as the Fed is on track to aggressively raise rates to combat inflation pressures. A recessionary environment will negatively affect the entire bank group. However, Winter believes balance sheet positioning at Huntington Bancshares is less favorable relative to his regional bank peers.
Huntington Bancshares stock has a 52-week trading range of $11.67 to $17.79, and it traded near $12 a share on Tuesday. The stock is down 21% year to date. The dividend yield is 5.1%.
East West Bancorp
Chiaverini was on this call as well, and he downgraded the shares to Neutral from Outperform and has a $75 price target. East West Bancorp Inc. (NASDAQ: EWBC) stock closed most recently at $66.43, so the implied upside is 13%.
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