Review Of Analyst Downgrades This Week - Part IX

 |  Includes: CY, FB, FMER, KAR, NEON, SHW
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 June 4th till June 8th.

Cypress Semiconductor

Cantor Fitzgerald rates Cypress Semiconductor (CY) with a sell rating accompanied with a $11 price target. Analysts see some 16% downside potential for the company amidst substantial long term competitive pressures from Neonode (NASDAQ:NEON). Furthermore architectural issues no longer warrant a premium valuation to its peers. Shares have fallen 22% year to date after the company lowered its first quarter guidance.

Sherwin Williams

Bank of America/Merrill Lynch lowered its advice for Sherwin Williams (SHW) from neutral to underperform with a $122 price target. Shares have some 7% downside according to analysts as the premium valuation leaves little room for error. Shares in the manufacturer and distributor in paint and coatings have already returned 47% this year after the company issued a strong guidance outlook for its first and second quarter.


R.W. Baird lowered its advice for FirstMerit (FMER) from neutral to underperform with a $13 price target. Shares in the bank holding company have some 16% downside potential according to analysts. So far this year shares have traded in a tight consolidated range of $15 till $17 per share.

KAR Auction Services

Barclays Capital lowered its advice for KAR Auction Services (KAR) from equalweight to underweight with a $14 price target. Analysts see some 10% downside potential for the provider of vehicle auction services in North America. Shares have returned 15% so far this year but have seen some weakness in recent weeks after the company lowered its full year earnings per share outlook.


Bernstein initiated its advice for Facebook (FB) with an underperform rating and a $25 price target. Shares have some 8% downside potential according to analysts as the company struggles to achieve its sales growth target for the year amidst difficulties to monetize mobile user growth. Analysts expect earnings per share of $0.25 for 2012 and $0.65 in 2013. The price target of $25 represents a 34% discount from its public offering price of $38.


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). Bernstein's downgrade of Facebook and Cantor's downgrade of Cypress Semiconductor came after significant share price declines already.

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