Review Of Analyst Downgrades Last Week - Part XIII

Includes: AFL, BBRY, LNC, MET, PGR
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 July 2nd to July 6th.

Research in Motion

Barclays Capital lowered its advice for Research in Motion (RIMM) from equal weight to underweight with a $6 price target. Analysts see some 35% downside potential for shares of the once so successful BlackBerry manufacturer. Analysts cite the main reasons behind the downgrade being; "ongoing churn in North America, weak business-to-business demand and low-end competition from Android and Nokia." Furthermore an often advocated break-up of the company does not make much sense as "devices and service technologies are tightly intertwined and difficult to separate from each other." Shares of Research in Motion fell almost 20% after announcing its quarterly results to lows around $7.40 but have recovered almost 10% last week, ending at $8.10 per share. Year to date shares are down about 45% and shares are almost off 95% from their peak in 2008 amidst the declining popularity of the BlackBerry, increased competition from Apple and a continued delay of its new offerings.

Lincoln National

Barclays Capital lowered its advice for Lincoln National (LNC) from equal weight to underweight with a $20 price target. Analysts see some 5% downside potential for the holding company providing insurance and retirement services. Analysts cite the company's elevated sensitivity to low interest rates. "While valuations are currently low, about 50% of earnings are interest-rate sensitive," according to analysts at Barclays. Analysts see other competitors including MetLife (MET) and Aflac (AFL) being less sensitive to falling interest rates." So far in 2012 shares in Lincoln National have returned 7%, now trading around $20.77 per share. Shares peaked around $27 per share in March of this year when the entire financial sector set new highs on the back of positive stress tests results.

Progressive Corp

Deutsche Bank lowered its advice for Progressive Corp (PGR) from hold to sell with a $17 price target. Analysts see some 18% downside potential for the holding company offering insurance for autos, motorcycles and a range of other motor-operated devices. "Avenues to margin expansion become few and revenue does not appear to be growing quickly enough to justify the price-earnings multiple in excess of the market," according to Deutsche Bank's analysts. Shares of Progressive trade with year to date gains of 5%, now trading around $20.58. Shares peaked at $23 per share in March and April before gradually falling back to levels in the low twenties at the moment amidst worries about slowing economic growth.


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).

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