The Sell List: Analysts Have Good Reason to Hate These 7 Stocks
While market experts often arouse the scorn of Internet critics, investors should nevertheless pay particular attention to the stocks analysts are selling. It all comes down to both the influence that these authorities exert along with their professional reputation.
To illustrate, rather than looking at stocks analysts hate, let’s consider the more common scenario: securities that Wall Street loves. Recently, Wedbush analyst Dan Ives pounded the table on Vietnamese electric vehicle manufacturer VinFast (NASDAQ:VFS). Personally, I thought VFS shares belonged more at home in a waste management facility rather than in the open market.
However, a nagging thought entered my mind: why would Ives risk his reputation on something so wildly speculative? Based on his acumen and his willingness to stick his neck out, I stated in an opinion piece that yes, VFS could rise higher in the near term. Ives was right.
Stated differently, Wall Street ratings and price targets can influence the market. And that goes for the other way as well, which is why stocks analysts are selling warrant closer examination. You see, these experts prefer a diplomatic approach to foster relationships with public companies. It really takes something “special” for analysts to outright recommend dumping a stock.
With that in mind, below are stocks analysts hate.
Fox (FOX)
Given the controversies surrounding the multinational mass media enterprise, it’s probably no surprise that Fox (NASDAQ:FOX) ranks among the stocks analysts are selling. Within the past three months, TipRanks reveals that the Street’s experts rate FOX a moderate sell. The assessment breaks down as two holds, one sell and conspicuously, zero buys.
To be fair, the average price target stands at $36, implying nearly 32% upside potential. However, the main problem for the media juggernaut centers on an unknown future without conservative firebrand Tucker Carlson. Love him or hate him, Carlson loved rattling the cage. In turn, he developed a loyal audience that appreciated his unwillingness to cave to so-called “woke” ideologies.
Now, it’s true that advertisers left the Fox network when Carlson was on air broadcasting his various conservative views. And it’s also true that once Fox ousted him, advertisers began returning. However, the company incurred a noticeable erosion of operating margin for only a marginal increase in revenue in the third quarter.
That’s a problem the experts refuse to ignore, making FOX one of the stocks analysts hate.
Avangrid (AGR)
As an energy services and delivery company committed to renewable energy proliferation, Avangrid (NYSE:AGR) on paper represents a relevant business. However, AGR happens to be one of the stocks analysts are selling. In the past three months, experts peg shares a moderate sell. This assessment breaks down as three holds and two sells.
With no one recommending a buy rating, the average price target of $33.40 – a mere 3.4% up from Thursday’s close – makes sense. As awesome as Avangrid is in terms of environmental, social and governance (ESG) initiatives, the numbers ultimately must add up. Unfortunately, the financials present major issues for the Street.
Yes, the company continues to expand the top line. However, both the gross margin and especially the operating margin slipped year-over-year in Q3. It’s also conspicuous that since the fiscal year ended 2016, operating margins have fallen consecutively.
On a trailing-12-month (TTM) basis, this metric is now sitting in single-digit territory when it once handily occupied double digits. Given the sustainability concerns, AGR is one of the stocks analysts hate.
FactSet Research (FDS)
Perhaps an ironic example of stocks analysts are selling, FactSet Research (NYSE:FDS) is a financial data and software company. It’s an invaluable tool for Wall Street professionals – the very experts who now rate its shares as a moderate sell. Adding insult to injury, not a single one issued a buy recommendation. Instead, the assessment breaks down as five holds and two sells.
Even more problematic, the average price target lands at only $429.86, implying almost 3% downside risk. For market observers, what may have stood out (in a bad way) was the company’s quarter ended August 2023. While revenue increased 7.4% YOY, gross margin slipped to 50.79% from 51.54% a year earlier. Also, operating margin declined slightly to 26.29% from 26.74%.
True, these represent small differences. However, with the expansion of the top line, you’d like to see margins stabilize, not decline. Also, a recent string of insider sells and no insider buys raises eyebrows. Thus, FDS is one of the stocks analysts hate.
Hormel Foods (HRL)
Personally, Hormel Foods (NYSE:HRL) pains me because, on a fundamental basis, it makes a great narrative for securities to buy. Sadly, it happens to be one of the stocks analysts are selling. Of course, looking at the charts, that should come as no surprise. Since the beginning of this year, HRL dropped more than 30% in equity value. Specifically, the assessment breaks down as two holds, three sells, and zero buys.
Adding to the woes for the American food processing company, the average price target for HRL sits at $30.40. That implies a downside risk of almost 5%. As for the reason, I believe it has to do with the disappointing operational performance. In the quarter ended October 2023, the company incurred a revenue growth loss of around 2.6%.
On top of that, gross profit dipped to $514 million from $566 million a year earlier. Also, operating margin came in at 9.31%, down from the nearly 11% the company posted in fiscal Q3 2022. Food companies should benefit as an essential business as consumers trade down from discretionary purchases. However, this business just isn’t getting it done.
Barclays (BCS)
Arguably the riskiest idea on this list of stocks that analysts are selling, Barclays (NYSE:BCS) may jump higher based on short-covering speculation. At least, a possibility of such a circumstance materializing exists. But first, the Street rates BCS a moderate sell; specifically, two analysts in late October both labeled shares a sell. Also, the average price target lands at an appropriately hellish $6.66.
That implies a downside risk of 7% from Thursday’s close. What has been driving the red ink – aside from general anxieties of a global recession – is the backing out of a major backer. According to Reuters, Qatar Holding, which is owned by Qatar Investment Authority, moved to sell around $644 million worth of BCS shares earlier this week.
Curiously, the sale comes just weeks ahead of Barclays expected fresh strategy announcement. Now, what gives me hesitation is that many institutional investors are selling BCS call options. That opens the door to a possible short-covering panic if BCS goes contrarian. Still, for now, it’s one of the stocks analysts hate.
Invesco Mortgage (IVR)
Probably the most straightforward recommendation among stocks analysts are selling, Invesco Mortgage (NYSE:IVR) simply suffers from a tough business environment. Frankly, that’s obvious when you consider the year-to-date loss of almost 38%. Unsurprisingly, the experts peg shares a moderate sell, breaking down as two holds and one sell. Also, the average price target comes in at $7.75, implying more than 5% downside risk.
Fundamentally, Inveso – which is a real estate investment trust (REIT) that specializes in acquiring, financing and managing residential and commercial mortgage-backed securities and mortgage loans – stares down trying sector-wide headwinds. With interest rates sky high and companies dealing with post-pandemic dynamics, Invesco’s core sectors suffer from demand erosion.
Really, management laid out the problems for IVR shareholders. Per the company’s Q3 disclosure, it identified both higher interest rates and escalating interest rate volatility as severe challenges. Also, it doesn’t help that the company incurred significant net losses in 2020 and 2022. The company now has retained losses of $3.52 billion as of the most recent quarter.
Cracker Barrel (CBRL)
Though a popular restaurant, Cracker Barrel (NASDAQ:CBRL) faces pressure from a pressured environment within the consumer economy. As headwinds such as inflation and mass layoffs crimp sentiment, people are less likely to go out and dine in at restaurants. At the very least, the frequency of such visits may wane. So, it’s no shocker that CBRL ranks among the stocks analysts are selling.
Specifically, experts rate shares a moderate sell, breaking down as five holds and three sells. Once again, no analyst decided that Cracker Barrel is worthy of a buy rating. Further, the average price target sits at $68.57, implying more than 7% downside risk. On a financial level, the company draws skepticism for its fading operational performance.
Conspicuously, revenue came in at $824 million in the quarter ended October 2023, down 1.9% YOY. Worryingly, operating income was $11 million in the most recent period, down from $24 million one year earlier. That suggest rising expenses are taking its toll on the eatery, making CBRL one of the stocks analysts hate.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
