Shares for Twitter (TWR), Macy’s (M) and Alphabet (GOOGL) tumbled on Wednesday on news that their stocks were downgraded by analysts. Here’s why:
1. Twitter Downgraded to “Underperform”
Twitter slipped in pre-market trading after being downgraded from “neutral” to “underperform” by Mizuho, TheFly reports.
The $15 price target was maintained, but the firm stated that shares were inflated by speculation of a takeover. Mizuho says the stock is overvalued at its current level, citing that fundamentals have “deteriorated significantly” over the last year.
Mizuho also speculates that most of the potential buyers are not likely to play out.
Loop Capital also downgraded Twitter’s stock from “hold” to “sell” and maintained its $18 price target, TheFly also reported.
2. Macy’s Downgraded to “Overweight”
Macy’s was downgraded to “overweight” from “neutral” by Credit Suisse, sending the stock down in pre-market trading. Credit Suisse maintained its $40 price target.
The firm said the retailer’s store base should allow it to adjust its fixed cost base to offset declines in in-store sales. The adjustment would allow for improved sales and returns.
While Macy’s has good cash flow and expanding profit margins, net income is falling and returns on equity have been disappointing. These weaknesses are offsetting the company’s strengths.
The company has been struggling with declining sales and has recently announced the closings of hundreds of stores.
3. Alphabet Downgraded to “Underperform”
Shares for Alphabet slipped after being downgraded from “neutral” to “underperform” by Wedbush, according to TheFly. The firm also lowered Alphabet’s stock rating to $700.
The firm speculates that the stock could face pressure due to a number of issues. Wedbush says Google’s mobile search ads push traffic from organic to paid, which has “decelerated sharply,” according to MarketWatch.
The move, they argue, could make monetizing these customers a challenge as investors compare the cost of these search ads with ROI.
