A key reason a stock price drops is one or more analyst downgrades. An analyst typically downgrades a stock because they believe it is overvalued based on an analysis of factors such as the company's fundamentals, its competition, new industry regulations, and macroeconomic conditions.
However, a downgrade doesn't necessarily mean issuing a “Sell" rating. In many cases, analysts move a stock from “Buy" (or an equivalent rating) to “Hold" (or an equivalent rating).
Investors should also focus on the number of analysts downgrading a stock. One or two downgrades won't mean a lot for stocks that dozens of analysts cover. But if the stock receives a significant amount of downgrades over a period of time, it's likely to put pressure on the stock price.
In this special presentation, we're looking at seven heavily downgraded stocks that are still worth a look, and investors can consider buying on a pullback. The stocks chosen have received a significant amount of analyst downgrades in the last 90 days ending April 30, 2024.
Quick Links
- Tesla
- Boeing
- Meta Platforms
- Biogen
- Lululemon Athletica
- Palo Alto Networks
- onsemi
#1 - Tesla (NASDAQ:TSLA)
In the last 90 days, Tesla Inc. (NASDAQ: TSLA) has received 30 downgrades, the most downgrades of any stock tracked by MarketBeat. That’s not surprising. At any given time, Tesla receives a significant number of downgrades. However, 20 of those downgrades came in April, specifically since Tesla delivered a disappointing earnings report.
Tesla is losing market share in China. While the company is in no danger of losing its significant market share lead in the United States, demand for EVs is below forecasts for many reasons.
However, true believers continue to believe that Tesla is more than a car manufacturer. Tesla’s CEO Elon Musk thinks that as well and is staking the company’s premium valuation on its ability to become a leader in full self-driving (FSD) technology. Renowned tech sector analyst Dan Ives of Wedbush agrees that FSD is a key for Tesla.
That reality is likely to take years to develop. But if you have the time and the belief, TSLA stock may be a value, particularly if the price dips to around $165, which has been a solid support level in the last year.
About Tesla
Tesla, Inc designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits; and non-warranty after-sales vehicle, used vehicles, body shop and parts, supercharging, retail merchandise, and vehicle insurance services.
Read More - Current Price
- $421.06
- Consensus Rating
- Hold
- Ratings Breakdown
- 17 Buy Ratings, 14 Hold Ratings, 9 Sell Ratings.
- Consensus Price Target
- $272.06 (35.4% Downside)
#2 - Boeing (NYSE:BA)
The Boeing Co. (NYSE: BA) is tied for the second-highest number of downgrades with 21. And as recently as May 1, 2024, Argus downgraded Boeing to Hold.
Boeing had a disastrous first quarter in 2024. Numerous quality control issues led to the announcement that its CEO would resign by the end of the year.
As a result, BA stock is down 34% in 2024, erased all of the gains it made in the last 12 months. Nevertheless, there’s a reason to consider BA stock more than just a momentum play.
The reason is that, while the company may deliver fewer planes as they heighten their quality control efforts, it’s nearly impossible to believe that the quality of their aircraft will get worse. That means that, over time, revenue and earnings will improve. That could be why the Boeing analyst ratings on MarketBeat continue to show a consensus price target for BA stock of $222.41. That’s not a short-term story but an idea that could take flight.
About Boeing
The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. The company operates through Commercial Airplanes; Defense, Space & Security; and Global Services segments.
Read More - Current Price
- $177.35
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $190.11 (7.2% Upside)
#3 - Meta Platforms (NASDAQ:META)
Meta Platforms Inc. (NASDAQ: META) has had 20 downgrades in the last 90 days, all of which came in April. That corresponds with the company’s first-quarter earnings report. The company beat on the top and bottom lines and rewarded shareholders with a dividend for the first time. However, the company says it will increase its capital expenditures (CAPEX) in the coming quarters. That caused META stock to drop 12.75%.
But this looks to be a case of analysts believing that a stock has gotten ahead of itself. Despite the stock’s post-earnings pullback, META is still up 21.5% in 2024 and 78% in the last 12 months. You can see that the bullish case is still in place when you look at the price targets. While analysts lower their targets, many remain at or above the consensus price.
On May 1, 2024, META stock was now trading at a forward P/E of 21x earnings, making the stock a better value for investors concerned about stretched valuations.
About Meta Platforms
Meta Platforms, Inc engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs. The Family of Apps segment offers Facebook, which enables people to share, discuss, discover, and connect with interests; Instagram, a community for sharing photos, videos, and private messages, as well as feed, stories, reels, video, live, and shops; Messenger, a messaging application for people to connect with friends, family, communities, and businesses across platforms and devices through text, audio, and video calls; and WhatsApp, a messaging application that is used by people and businesses to communicate and transact privately.
Read More - Current Price
- $585.25
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 37 Buy Ratings, 4 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $638.00 (9.0% Upside)
#4 - Biogen (NASDAQ:BIIB)
Biogen Inc. (NASDAQ: BIIB) is another heavily downgraded stock that could be worth your consideration. The news surrounding Biogen is complicated yet simple. The biotechnology company received FDA approval in the United States for Legembi, a potentially blockbuster Alzheimer’s drug, in July 2023.
But getting approval and getting revenue are two different things. Hospitals have to meet specific requirements for drug reimbursement. And they have to have procedures in place due to the fact that Legembi requires bi-weekly infusions.
However, Biogen did see a jump in patients in its first quarter of 2024. And, as you know, the addressable market for Legembi will likely mean billions in revenue for the company by 2030. That means the bottom could be in for BIIB stock, which was trading at five-year lows as recently as April 15, 2024. Analysts are projecting 12.25% earnings growth that will add to the confidence in a higher share price.
About Biogen
Biogen Inc discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases in the United States, Europe, Germany, Asia, and internationally. The company provides TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI, and FAMPYRA for multiple sclerosis (MS); SPINRAZA for spinal muscular atrophy; ADUHELM to treat Alzheimer's disease; FUMADERM to treat plaque psoriasis; BENEPALI, an etanercept biosimilar referencing ENBREL; IMRALDI, an adalimumab biosimilar referencing HUMIRA; FLIXABI, an infliximab biosimilar referencing REMICADE; and BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS.
Read More - Current Price
- $146.47
- Consensus Rating
- Hold
- Ratings Breakdown
- 13 Buy Ratings, 16 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $242.68 (65.7% Upside)
#5 - Lululemon Athletica (NASDAQ:LULU)
Lululemon Athletica Inc. (NASDAQ: LULU) is another company creating a buy-the-dip opportunity for long-term investors. The stock has received 20 downgrades in the last 90 days. The most recent action came from Barclays, which downgraded LULU stock from Outperform to Equal Weight on April 29, 2024.
Once again, the company’s earnings report is what spawned the analysts’ actions. The company beat on the top and bottom lines, but the guidance gave analysts the blues. Lululemon is noticing a slight pullback as consumers continue to wrestle with the impact of inflation.
The short-term concern could be that Lululemon just concluded what has traditionally been its strongest quarter. With the holidays behind it, the company may find it difficult to beat tough year-over-year revenue and earnings comparisons.
On the other hand, with LULU stock down 21.9% in the last three months, the stock is now trading at a more digestible 25x forward earnings. Analysts are also projecting 11% earnings growth, which could add more fuel for future growth.
About Lululemon Athletica
Lululemon Athletica Inc, together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.
Read More - Current Price
- $379.42
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $377.63 (0.5% Downside)
#6 - Palo Alto Networks (NASDAQ:PANW)
Cybersecurity is one of the issues that every business will have to address today and for years to come. And the rapid acceleration of artificial intelligence will only make this more urgent. Palo Alto Networks Inc. (NASDAQ: PANW) is the unquestioned leader in the sector. But it’s also on MarketBeat’s list of Most Downgraded Stocks, with 16 in the 90 days ending April 30, 2024.
The reason for the downgrades is mainly due to the company’s recently announced shift to its business model. The company is giving away some of its services in an effort to capture additional market share.
Nevertheless, Palo Alto still expects to deliver revenue growth of around 15%-16% in 2024. And despite the downgrades, the vast majority of the price targets for PANW stock are well above the consensus price of $314.82. With a stock that is still up 58% in the last 12 months, as Palo Alto’s is, a pullback is normal and expected.
About Palo Alto Networks
Palo Alto Networks, Inc provides cybersecurity solutions worldwide. The company offers firewall appliances and software; and Panorama, a security management solution for the global control of network security platform as a virtual or a physical appliance. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection, DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention.
Read More - Current Price
- $186.78
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 32 Buy Ratings, 9 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $201.40 (7.8% Upside)
#7 - onsemi (NASDAQ:ON)
Semiconductor stocks have been having a rough time of it in 2024. That’s not surprising since the sector is at the tip of the iceberg in terms of artificial intelligence (AI) buildout. That brings us to the last stock on this list, which is onsemi (NASDAQ: ON). The stock has received 15 downgrades in the 90 days ending on April 30, 2024. And 12 of those have come in April alone.
The question is growth. Although onsemi beat on the top and bottom lines in its first quarter earnings report, the numbers were lower year-over-year. In a year when chip stocks will face tough comparisons, that’s not what investors were hoping to see.
But as investors have a chance to look at the company’s financials, they’ll likely agree that while ON stock was due for a pullback, there’s still a lot of upside for the stock as it bounces off its 52-week low.
About Onsemi
onsemi is engaged in disruptive innovations and also a supplier of power and analog semiconductors. The firm offers vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure, with a focus on automotive and industrial end-markets. It operates through the following segments: Power Solutions Group, Advanced Solutions Group, and Intelligent Sensing Group.
Read More - Current Price
- $65.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 5 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $85.87 (31.1% Upside)
Investors have thousands of stocks and funds to choose from. Staying away from downgraded stocks makes sense for many investors and their portfolios. But that's not always the case. The saying “buy low and sell high" still applies. A downgrade often reflects a temporary situation, which can be an opportunity to initiate or add to a position.
However, before buying a heavily downgraded stock, it's important to question why you own or want to own the stock. You'll also want to make sure your investment goals give you the time to allow the stock to turn around.
MarketBeat offers a tool that makes it easy to find the stocks that have received the most analyst downgrades. You can apply specific filters to the screener to adjust for time frames as recently as 7 days or as long as one year. You can also filter by sector, market cap, and even overall analyst sentiment. This is a premium tool available for MarketBeat All-Access members.
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