Five stocks Wall Street is telling its clients to sell

 

The stock market is not easy to predict. Even the most seasoned analysts make mistakes, which is why you never want to put 100% of your faith in broker upgrades and downgrades.

Having said that, you still want to pay attention to what analysts have to say about particular stocks, and take analyst notes into consideration when planning which stocks you buy or sell in your portfolio.

Downgrades can happen for a variety of reasons. In some cases, an analyst will downgrade a stock simply because shares have run up in value, and the stock, albeit strong, appears to have exhausted its upside potential. In this circumstance, shareholders should use the downgrade as a reason to examine his or her position in a stock, and determine whether or not the time is right to lock in some profits and take some money off the table.

In other instances, a broker will downgrade a stock due to a fundamental breakdown in a part of the underlying company’s business. When this occurs, the downgrade should carry a little more weight.

The overall market has been steady over the last couple of months, but there are some stocks out there that analysts are advising their customers to cut loose. Let’s take a closer look at five stocks that analysts want you to sell now.

Jabil Circuit

Jabil Circuit (JBL) posted solid fiscal third-quarter numbers in mid-June, but the company lowered its earnings outlook, citing weakness in mobility sales. For the fourth-quarter, the company forecast revenues to fall 9% to a range of $4.15 to $4.35 billion. For the full year, the company now expects revenue of around $18.2 billion, versus its previous forecast $18.5 billion. It now forecasts full-year earnings of $1.85 per share, far weaker than the previous $2.12 forecast. Following the lowered guidance, Goldman Sachs cut its price target to $16 from $17 and has a “sell” rating on the stock. The stock has a low valuation, with a P/E of 12.4, and the stock is now trading at $19.43. Until the company improves its mobility business, it will be hard to get behind the stock, even at its low valuation.

JBL160622

Chart courtesy of www.stockcharts.com

Navistar International

Navistar International (NAV) was downgraded to a “sell” rating by analysts at Stifel in mid-June, and the research firm set a $10 price target on the stock. Stifel cited its reason for the downgrade on the belief that the company would struggle to hit analyst estimates over the next couple of years based on its outlook for a period of declining heavy and medium-duty trucks. The stock was trading at $13.15 at the time of the downgrade, and has since traded lower to $12.65. On average, analysts have a price target of $13.02 on the stock, so the downside is likely limited at this point, but if Stifel is correct, and the company begins struggling to hit quarterly estimates, the stock could easily move lower to Stifel’s $10 target.

NAV160622

Chart courtesy of www.stockcharts.com

Progressive Corp.

Property and casualty insurer Progressive Corp. (PGR) has been trending steadily lower since a disappointing earnings report in April, and the stock is likely to do so ahead of its next report, which is due on July 14. With the Federal Reserve not expected to lift rates too much over the next couple of years, the insurance sector, which generates a large portion of its income from interest, will remain under pressure, so PGR shares may find it tough to regain momentum unless the company is able to impress Wall Street with a better than expected quarterly report. Analysts at Citigroup recently downgraded the stock to “sell” from “neutral”, and lowered their price target on shares from $36 to $31. The stock is currently trading at $32.16, so it has a little more to fall if it is to drop to Citigroup’s target. The stock’s P/E is a low , but analysts forecast earnings to fall 11.4% this year, so the valuation is not a big enough reason to get behind the stock, as shares could continue to move lower on the earnings drop, and could really fall if the company is unable to meet its already weak expectations.

PGR160622

Chart courtesy of www.stockcharts.com

Bristol-Myers

Drug manufacturer Bristol-Myers (BMY) has enjoyed steady stock appreciation over the last three months, but the gains have pushed the stock into what appears to be overbought territory. The stock now trades with a P/E of 78, with a price of $72.72. On average, analysts have a $76.38 price target on the stock, which does suggests upside potential, but analysts at research firm Ned Davis recently downgraded the stock to “sell” from “neutral”. The stock’s valuation remains a concern, but analysts

forecast decent earnings growth of 27.4% this year, which could limit the downside. The big risk for the stock at this time is that shares are priced for absolute perfection, so any sign of weakness could results in a sizable sell off. The company has a strong record of posting better than expected quarterly numbers, and will next report on July 28. Given the upbeat earnings growth forecast, current shareholders may not want to immediately unload their position, but considering the stock’s recent strength, shareholders may want to have a stop-loss in place ahead of the upcoming earnings report just in case results do result in a sell off in the stock.

BMY160622

Chart courtesy of www.stockcharts.com

Genuine Parts Company

Auto parts retailer Genuine Parts Company (GPC) has been stuck in a sideways trend for the better part of the last four months, and on June 21, analysts at Zacks Investment Research lowered their rating on the stock to “sell” from “hold”. The research firm cited weakness in the company’s recent quarterly report, with revenue falling 0.5% versus the same period last year, and revenue falling short of analyst estimates. Like many companies, Genuine Parts, has been struggling to deal with the impact of the strong dollar, which previously forced the company to lower guidance. The stock is currently trading at $97.81, which is basically in-line with the street’s average price target of $97.43, which will likely prevent shares from making any meaningful move higher. The stock’s valuation is reasonable, with a P/E of 21.1, but earnings growth is muted, with the street expecting earnings to climb a modest 3.0% this year, which is not high enough to provide the stock the boost that it needs to break out of its current sideways trend. GPC is currently trading near the upper end of its 52-week range, but with the stock lacking the catalyst it needs to break out to the upside, current shareholders may want to consider locking in some of their profits, and investors interested in setting up a new position in the stock may want to consider picking up shares if and when the stock pulls back a bit.

GPC160622

Chart courtesy of www.stockcharts.com

Symbols: BMY GPC JBL NAV PGR
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

You May Also Like