Review Of Analyst Downgrades This Week - Part X

Includes: AKS, CHK, CMPR, MCD
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 11th to June 15th.


Barclays Capital lowered its advice for VistaPrint (VPRT) from equalweight to underweight with a $29 price target. Shares have some 6% downside potential according to analysts. Shares in VistaPrint fell almost 9% on Wednesday on the back of Barclay's downgrade. Analysts have concerns that fourth quarter profits could be under pressure as a result of fewer search queries for the company's services and a strong dollar. Shares have fallen some 30% since their highs of $43 in April this year.


Goldman Sachs lowered its advice for McDonald's (MCD) from buy to neutral with a $92 price target. Analysts see very limited upside for the fast food chain amidst a decline in same store sales growth. The bank notes that McDonald's shares trade at a premium to the S&P 500 despite the recent 10% correction and lower growth prospects. Shares are down 10% since the start of the year.

Chesapeake Energy

Bernstein lowered its advice for Chesapeake Energy (CHK) from outperform to market perform. The firms sets a little ambitious $21 price target as analysts see few immediate catalysts for an upside price move. While the company is trying to resolve its corporate governance issues, low natural gas prices continue to pressure on the stock. Shares have recovered some 30% from their lows of May as the company has been making progress in its financial restructuring. Recent divestitures totaling $4 billion and a 15% jump in natural gas prices on Thursday provided a boost to the stock as well. Despite the correction, shares have fallen 20% year to date.

AK Steel

Goldman Sachs lowered its advice for AK Steel (AKS) from hold to sell with a $5 price target. Weak steel prices, a high debt position and increasing pension funding requirements are all negative drivers for the shares. Analysts see some 6% more downside potential after shares already lost 35% since the beginning of this year. Until analysts can pick up signals indicating a turnaround in the lucrative electrical steel market, they remain bearish.


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). The downgrade of Vistaprint by Barclays is interesting in this light as analysts are actually warning about a possible downgrade ahead of time.

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