Typically the Wall Street research analysts are looking for ideas for investors to buy for their portfolios, and while they often do have Sell or Underperform ratings on stocks, those are usually not the companies they spend the greatest amount of time and energy marketing. However, when you think about it, it does make sense for Wall Street firms to do some work on companies they are not bullish on, as it can help save some customers from a potentially bad trade.
A new research report from the technology analysts at Wedbush gets down to brass tacks with “5 Tech Stocks to Avoid.” While not pounding the table and urging shareholders to unload at once, they do make the case on each as to why they are not very positive.
This may be the biggest surprise on the Wedbush list. Alphabet Inc. (NASDAQ: GOOGL), through its subsidiaries, builds technology products and provides services to organize the information. The company offers Google Search, which provides information online, and Google Now, which offers information to users when they need it.
It also provides YouTube, which offers video, interactive and other ad formats. Android is an open source mobile software platform. Its hardware products include Chromebook, Chrome OS devices, Chromecast and Nexus devices. Google Play is a cloud-based digital entertainment store for apps, music, books and movies, while Google Drive is a place for users to create, share, collaborate and keep their stuff. Google Wallet is a virtual wallet for in-store contactless payments.
The Wedbush team makes the case that some of the mobile changes from last year have cycled, and search monetization may be peaking, which could lead to some second half of 2016 risk. The report also says:
Longer-term we see the risk from new platforms and methods of marketing that may offer more compelling options to consumers at the end of the purchase funnel. We weigh the potential positive catalysts from mobile monetization improvements, YouTube ad growth, and greater visibility on expenses against: 1) continuing competition to search a) on the fast-growing mobile platform, b) in the application of social signals to commerce, and c) from vertical search/e-commerce platforms, and 2) increasing competition for YouTube from video offerings on social platforms and extensions of classic TV networks.
The Wedbush rating on the stock is Neutral with an $840 price target. The Thomson/First Call consensus price target is higher at $910.84. Shares closed most recently at $731.09.
This stock has struggled mightily since 2014, and the Wedbush team sees the stock range-bound at best. Groupon Inc. (NASDAQ: GRPN) operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America, Europe, the Middle East, Africa and elsewhere. It also provides deals on products for which it acts as the merchant of record. The company offers deals in various categories, including food and drink, events and activities, beauty and spa, health and fitness, home and garden, and automotive, as well as deals on various product lines.
While the analysts feel that the company remains a good way from retailers to gain customers and traffic, they think the current restructuring will provide headwinds for the stock going forward. With that in mind, they do feel that management’s growth strategy is solid and could begin to show gains in 2017 at the earliest.
Groupon is rated Neutral with a $4 price target. The consensus price objective is $3.94. Shares closed Tuesday at $3.53.