While many S&P 500 stocks are reaching recent highs, Wall Street analysts are also reassessing their price targets and issuing outlook changes and downgrades for a number of companies. Today, we introduce three stocks with price target cuts.
Analyst downgrades often offer valuable insights into a company’s share price, revealing factors like overvaluation, profitability concerns, or rising competition. These recent stock downgrades underscore a shift in market sentiment, prompting investors to reevaluate their positions. With that information, here are three popular stocks with recent target cuts, potentially poised for a period of price consolidation shortly.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) stands at the forefront of cutting-edge semiconductor innovation with its Snapdragon system-on-a-chip (SOC), solidifying its position in the global telecommunications landscape. The Snapdragon product family, utilized in most Android phones, is poised for growth as the rollout of 5G networks continues globally.
Citigroup recently downgraded QCOM from buy to neutral, citing lower-than-expected guidance in its first-quarter earnings report, despite a 5% year-over-year (YOY) revenue growth and a 24% jump in net income. Citigroup’s caution stems from concerns over QCOM’s long-term prospects, particularly its loss of market share to the handset giant Samsung Electronics, and Huawei’s resurgence in the Chinese 5G handset market. These developments could likely offset any benefit from a global handset market recovery in 2024.
Despite these challenges, Qualcomm remains well-positioned to leverage the global rollout of 5G networks. Moreover, its strategic expansion into growth areas like connected cars and the Internet of Things (IoT) underscores its adaptability and resilience.
QCOM stock is trading around $145, roughly flat year-to-date (YTD). Forward price-to-earnings (P/E) and trailing price-to-sales (P/S) ratios stand at 15.3 and 4.5 respectively. Despite being one of the stocks with recent target cuts, the 12-month median price forecast for Qualcomm shares is at $160, signaling roughly a 10% upside.
SoFi Technologies (SOFI)
Next on our list of stocks with recent target cuts is the fintech pioneer SoFi Technologies (NASDAQ:SOFI), which provides a suite of financial services, including loan products, investment solutions, and digital banking offerings. In late January, the fintech company released robust fourth-quarter results that propelled the stock 20% higher in a single trading session. SoFi reported net revenue of $615 million, a 35% YOY increase, and achieved its first GAAP net income profitability of 2 cents per share. However, management cautioned lending revenues to decline by 5-8% in 2024, driven by slowing originations and loan growth, macroeconomic headwinds, and capital constraints.
Despite a worsening top-line growth outlook for 2024, SoFi’s earnings growth is expected to accelerate after 2024, driven mainly by its rapidly growing customer base. However, Morgan Stanley has downgraded SoFi to underweight from equal weight, revising its price target from $7 to $6.5. The investment bank finds the path to 2026 profitability suggested by SOFI’s management too optimistic, and sees a worsening top-line growth outlook for 2024.
SOFI stock has declined over 20% YTD to around $7.80. Forward P/E and price-to-book (P/B) ratios stand at 152 and 1.4 respectively. The average analyst price target for SoFi shares is $9.25, suggesting a potential 20% upside from current levels.
Vertex Pharmaceuticals (VRTX)
Vertex Pharmaceuticals (NASDAQ:VRTX) is the final company in today’s discussion of stocks with recent target cuts. Baird has recently downgraded the biotechnology company to underperform from neutral due to “irrational exuberance” for VX-548, the non-opioid treatment candidate for acute pain. Vertex recently reported positive phase 3 data for VX-548, and announced plans to apply for regulatory approval in the coming months. Yet Baird has reservations regarding the drug’s commercial viability.
On Feb. 6, another outlook downgrade came from Evercore ISI Group, following the release of Vertex Pharmaceutical’s fourth-quarter earnings, which showed a 9% YOY increase in fourth quarter revenue to $2.52 billion.
VRTX stock is hovering around $420 and have gained around 3% YTD. Shares are trading at a valuation of 26.7 times forward earnings and 11.3 times sales. The stock presents a 5% upside potential, based on average analyst price target of $445.5.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.