Review Of Analyst Downgrades This Week - Part III

by: The Value Investor

Analysts have been sending out their research reports to their clients again this week. The following is a review of the most important downgrades for the week of April 23-27.

MetroPCS Communication

Deutsche Bank has lowered its advice for MetroPCS Communications (PCS) from buy to hold and lowered its price target to $9 per share. Shares in the wireless broadband mobile communication provider have lost 13% over the recent week. The carrier reported bad results as a consequence of being locked out of the iPhone. High churn rates for the no-subscription provider in combination with higher promotional expenses resulted in a 63% decline in first quarter profits. The dismall earnings report send shares towards their lowest levels for the year.

Penske Automotive Group

KeyBanc Capital Markets has lowered its advice for Penske Automotive Group (NYSE:PAG) from buy to hold without specifying a price target. Shares in the automotive retailer hit fresh all time highs this week after reporting strong first quarter results. Analysts see no specific negative drivers for share in the short term but cite an overall "valuation call" as their reason for the downgrade.

Big Lots

Deutsche Bank lowered its advice for Big Lots (NYSE:BIG) from buy to hold with a $34 price target. The prospects for the close-out retailer are less positive after the company lowered its 2012 outlook this week triggering an 18% sell-off. The retailer unexpectedly predicted a decline in US same store sales. As recent as March the company expected a 2-4% same store growth but a slowdown in March has continued for the month of April. The bank says that the magnitude and category of the revenue shortfall raises structural concerns.

Hess Corporation

Barclays Capital lowered its advice for Hess (NYSE:HES) from overweight to equalweight with a $60 price target. Shares in the integrated energy company lost 6% during the last trading week after the company warned that oil output from the Bakken field would fall short of its 2012 target. Production which came in at 47,000 barrels per day in April will come in slightly short of the original planned 60,000 barrels per day for the full year.


RBC Capital Markets has lowered its advice for Symantec (NASDAQ:SYMC) from outperform to sector perform with a $18 price target. Shares of the provider of security, storage and system management solutions fell 9% during the week after the company lowered its fourth quarter revenues and earnings estimate. The absence of a catalyst such as a issuance of a meaningful dividend, the divesture of a slow growth business or major reorganization is unlikely according to the analyst.


Despite a positive trading week analysts see some downside in some companies. The recent rally has pushed valuations in some names a little too far. Unfortunately for investors in most of the names the warnings (downgrades) comes after the fact. Only the downgrade of Penske was made before a meaningful downward move took place.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.