All eyes were on Janet Yellen this afternoon, waiting for the Federal Reserve chairperson to catapult stocks higher or send them into a tailspin. When the decision to not raise interest rates was packaged with a still-optimistic bent, investors weren’t sure what to think … initially. They made a decision soon enough. The S&P 500 ended the session at 2,163.12, up 1.09%, and putting pressure on a key technical ceiling.
Not every name rode the bullish wave though. Skechers USA Inc (NYSE:SKX), American Airlines Group Inc (NASDAQ:AAL) and Netflix, Inc. (NASDAQ:NFLX) were all sent markedly lower thanks to brewing analyst doubts.
Netflix, Inc. (NFLX)
It’s a concern that has been swirling in the market’s ether for a while now, but it at least partially solidified for Netflix shareholders today. That is, the company’s subscriber growth appears to be slowing, and Q3’s subscriber additions figure may validate that worry.
Data mining company M Science presented the idea, explaining its information suggested Netflix isn’t going to add any net subscribers for the quarter about to end. Higher subscription prices means the company is losing members just as quickly (or just as slowly) as it is adding them. NFLX had projected net growth of 400,000 subscribers for the third quarter, and analysts were predicting 351,000 net additions.
Fanning the bearish flames that burned NFLX on Wednesday was this detailed look at the company’s problems by Forbes contributor David Trainer. Namely, shrinking margins and an increasing cash burn. He makes a case that’s tough to argue with.
NFLX ended the day down 3.4%.
American Airlines Group Inc (AAL)
NFLX wasn’t the only name to suffer a downgrade on Wednesday. American Airlines Group shares fell 1.4% after Raymond James lowered its opinion on the airline and the current valuation of AAL stock.
Raymond James analysts Savanthi Syth and Matt Roberts cut their stance on AAL from an “Outperform” to a “Market perform,” explaining:
“We are downgrading American Airlines from Outperform to Market Perform due to relative valuation compared to legacy peers and downside to consensus despite anticipated favorable RASM trends… Our 2016E and 2017E EPS are lowered from $5.25 to $5.20 (-9% y/y on a tax-adjusted basis) and $5.30 to $4.35 (-16% y/y), respectively, primarily reflecting the new mechanics contract. We are also introducing 2018E EPS of $5.30 (+22% y/y). These compare to consensus of $5.43, $4.83, and $4.95, respectively… we expect a sharper decrease in annual buybacks at American in 2017, albeit from levels well above that of its peers. A curtailment is expected in 2019 due to an increase in debt repayment, pension payments, and potential cash taxes (likely in 2019 or 2020). However, this is unlikely to be focus for investors in the near term.”
Roberts and Syth also noted that AAL shares were more expensive, based on earnings, compared to stocks of peers Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL).
Skechers USA Inc (SKX)
Finally, like NFLX and AAL, Skechers was downgraded today, inspiring more selling than most stocks experienced for the session.
Morgan Stanley did the deed, sending SKX down 8.7% when it lowered its stance on the shoemaker to only an “Equal weight,” simultaneously lowering its 2016 earnings estimate for the company from $2.25 per share of SKX to only $1.85 per share. Morgan Stanley also lowered its price target on SKX from $41 to $25, citing logistical problems stemming from a transition to new shoe fashions.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
