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 28 till June the 1st.
Deutsche Bank lowered its advice for Frontline (FRO) from hold to sell with a $2 price target. Shares in the shipping company have seen a rollercoaster ride this year moving up from $4 in January to $8 in March before falling back to $4 at this moment. Deutsche Bank's sell warning comes after shares have already fallen significantly. Analysts point out that there is more downside potential for the shares as the company's fleet continues to age which limits the potential earnings upside in a recovery. Furthermore the net asset value of the company is still negative.
Seagate Technology PLC
Barclays Capital lowered its advice for Seagate Technology PLC (STX) from overweight to equal weight with a $29 price target. "Certain developments could impact the earnings guidance in the second half of the year", according to analysts of the British Bank. Personal computer sales and higher computer inventories may put pressure on the shares of the company despite the fact that the company is inexpensive and it returns cash to its shareholders. Shares of Seagate Technology have seen a significant pullback from $32 earlier this year to $22 at the moment. Despite the significant decline, shares are still up 32% year to date.
Western Digital Corp
Barclays Capital lowered its advice for Western Digital Corp (WDC) from overweight to equal weight with a $37 price target. The company is facing some headwinds, similar to Seagate Technology, including higher personal computer inventories and headwinds in personal computer selling trends. Shares of the provider of collection, storage and other equipment have fallen 3% year to date, now trading at $30 per share after peaking at $44 in April this year.
Goldman Sachs lowered its advice for Federated Investors (FII) to sell with a $17 price target. Goldman sees some 10% more downside potential for shares of the provider of investment management products. The bank points out that the company is leveraged to lower interest rates and it could see outflows from money market funds as rates are coming more and more under pressure. Shares of the company have increased 25% so far this year after peaking at $23 in March this year.
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). Deutsche Bank's downgrade of Frontline and Barclays downgrade of Seagate Technology and Western Digital came after significant falls in their share prices.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.