Review Of Analyst Downgrades This Week - Part VI

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 May 14 till May 18.


Barclays Capital lowered its advice for Sysco (NYSE:SYY) from equal weight to underweight with a $27 price target. Analysts at the UK based bank believe there is some 3% downside potential in shares of the food distributor which has beaten on its quarterly earnings report recently. Shares have already fallen 5% year to date on a diminished growth outlook for the company.


Societe Generale lowered its advice for Nokia (NYSE:NOK) from hold to sell with a price target of Euro 1.80. Analysts believe that operating cash flows will get "worse before it gets better". The drop in sales is enough to burn through the existing cash pile and might question the entire company's survival. Societe Generale sees a Euro 2 billion write-off from the devices and services business and foresees some 15% further downside potential.


Goldman Sachs downgraded Symantec (NASDAQ:SYMC) from neutral to sell with a $14 price target. Analysts see some 7% downside as shares are expected to underperform the wider market. Margins and consequently cash flows are expected to continue to deteriorate. The transition into the lower margin, higher growth business are not enough to offset headwinds in the core business. Shares have lost already 4% year to date.

KLA Tencor

JP Morgan downgraded KLA Tencor (NASDAQ:KLAC) from neutral to underweight with a $42 price target. Analysts expect KLA's business to slow down in the second half of the year which implies 10% more downside for shares of the manufacturer of process control machinery. Shares have fallen 4% year to date amidst a general correction in stocks in recent weeks.

Lam Research

JP Morgan lowered its advice for Lam Research (NASDAQ:LRCX) from neutral to underweight. Analysts have a $35 price target for the supplier of wafer fabrication equipment suggesting some 10% more downside potential. Similar to competitor KLA Tencor, the bank sees slower expected growth in the second half of the year. Shares have outperformed its competitor returning 4% year to date.


As is well known, analysts research reports tend to be heavily biased towards the buy side. This makes any sell side research much more interesting as banks do not have to please their corporate customers in order to win investment banking deals. Unfortunately some of the recommendations come after the fact (often after an earnings release). Of interest is a wider industry downgrade from JP Morgan for the chip related sector which includes the downgrade of Lam Research and KLA Tencor.

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