3 Recent Downgrades Investors Should Consider

Includes: SYNC, TM, YGE
by: Matt Schilling

When it comes to investing, many investors use the recommendations of Wall Street firms to either buy or sell stock in a publicly traded company. On Friday June 1st, these three companies were downgraded by several analysts, and investors should pay close attention to their upcoming earnings announcements in an effort to either buy for the long term or sell for the short term.

Synacor, Inc. (SYNC) - Founded in 1998, and based in Buffalo, New York, SYNC currently trades at a P/E ratio of 28.50 and in a 52-week range of $11.76/share (52-week low) and $13.39 (52-week high). Analysts expect SYNC to earn $0.04/share for the second quarter on revenue of $30.78 million dollars and $0.16/share on revenue of $124.74 million for the year.

Stifel Nicolaus, Citigroup, and Bank of America Merrill Lynch all downgraded SYNC. With the stock down over 18% in intraday trading, there are two things investors should understand with regards to the recent performance. First, analysts from Stifel are arguing that the company's valuation isn't on par with other competitors in the digital advertising space, and have noted the company's treatment more so as a cloud company than anything else. Second, even though Bank of America Merrill Lynch and Citigroup remain bullish on the stock, they've noted efforts by the infamous stock promoter Jonathan Lebed, have caused an unwarranted run-up in the stock. I'd personally stay away until the dust settles and not look to establish a position until the company puts together a solid string of positive earnings that include better guidance. I could see SYNC missing estimates by at least $0.01/share on revenue of $28.5 million dollars.

Yingli Green Energy Holding, Co. (NYSE:YGE) - Founded in 1998, and based in Baoding, China, YGE currently trades in a 52-week range of $2.50/share (52-week low) and $3.04 (52-week high). Analysts expect YGE to post a loss of -$0.17/share for the second quarter on revenue of $497.05 million dollars and a loss of -$0.56/share on revenue of $2.07 billion for the year.

CICC downgraded YGE to a HOLD after the company announced its first quarter results on May 30th. There are worries that the company's strategy, which is focused heavily on China, may hurt more than it would help. That being said, I'm not exactly a fan of YGE, especially after the company's earnings, which were a mixed bag of results as EPS missed estimates by $0.03/share and revenue beat estimates by $52 million. I'd stay away from YGE at these levels, especially since solar demand in the Euro region has weakened considerably and US tariffs continue to hinder the growth of the industry. After missing analysts expectations in three of the last four quarters, YGE will most likely miss by $0.04/share - $0.06/share on revenue of $475.2 million or less.

Toyota Motor Corporation (NYSE:TM) - Founded in 1933, and based in Toyota City, Japan, TM currently trades in a 52-week range of 60.37/share (52-week low) and $87.15 (52-week high). Analysts expect TM to earn $1.74/share for the second quarter on revenue of $65.19 billion dollars and earn $2.14/share on revenue of $228.79 billion for the year.

Even though May U.S. sales for the Japanese automaker rose 72.9%, TM was down nearly 2.6% during intraday trading, as Credit Suisse downgraded the company. Credit Suisse noted that the numbers were a bit misleading since an earthquake struck during the comparable period from a year ago. That being said, and in my opinion, the numbers were not only solid from Toyota Motor but from companies such as Ford (+13%) and General Motors (+11%) as well. I actually like Toyota at these levels, and think that continued growth is in store for the automotive sector as whole. I'd establish a small to moderate position and add to that position as future earnings announcements drew closer.

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