After an extremely weak opening to 2016, the S&P 500 has bounced back a bit in the last couple of weeks. However, while many investors are celebrating the market rebound, some Wall Street analysts see the move as a great opportunity to sell or short popular tech stocks Tesla Motors (TSLA), GoPro (GPRO) and Twitter (TWTR).
According to these analysts’ price targets, each of these stocks has at least 25% downside from their current share price. Here’s a look at what the analysts have to say about these three :
Tesla (TSLA) Stock: 25% Downside
TSLA stock is already down 23% in the past six months, but UBS analyst Colin Langan still believes that shares are destined for around $140 in the next year. While the market cheered TSLA’s surprising core operational cash flow of $179 million in Q4, Langan points out that the company’s “net” cash flow on the quarter (including capex) was negative $232 million.
Despite a positive market reaction to the company’s shipment and margins projections for 2016, TSLA has now burned through more than $3.2 billion in cash in the past two years, and Tesla’s cash on hand declined from $1.4 billion in Q3 to below $1.2 billion in Q4. That cash burn suggests that a dreaded equity sale may be on the horizon at some point.
And when more Tesla shares hit the market, that means dilution.
UBS maintains its “Sell” rating on TSLA, and the firm’s $140 price target implies about 25% downside within the next year.
GoPro (GPRO) Stock: Is 40% Stumble Ahead?
GoPro stock is down a staggering 66% in the past six months, but Piper Jaffray analyst Erinn Murphy sees even more pain for GPRO shareholders on the horizon. Not only did GPRO’s Q4 revenue miss consensus expectations, it also came up $65 million short of the low end of the company’s guidance.
The action camera maker has been slashing prices to clear inventory, which has weighed heavily on its margins. EBIT margins, which were as high as 16.56% in 2011 and 13.42% in 2014, fell to just 3.38% in Q4.
Despite GoPro stock’s selloff, Murphy believes that things will get much worse before they get better. Piper maintains its “Underweight” rating on GPRO, and its $7.50 price target implies massive downside of over 40% for shares.
Twitter (TWTR): Not Done Diving
TWTR is another stock that has been beaten down badly in recent months. Despite a recent bounce, TWTR has now fallen 33% in the past six months.
Unfortunately for TWTR stock owners, Stifel analyst Scott Devitt thinks things will get much worse from here. In a recent note, Devitt compared Twitter’s struggles to maintain its growth trajectory with similar problems faced by Yahoo! Inc. (YHOO) and AOL, Inc. (AOL). Says Devitt,
“If Twitter is in the early stages of following a similar path to ex-growth as AOL and Yahoo! experienced before it, as seems to be the case, then there is likely more downside for TWTR common stock.”
How much downside? Stifel currently has a “Sell” rating on TWTR and a $12 price target on the stock, implying downside of about 35%. Yikes!
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
