Considering the Q1 GDP growth rate was revised from 0.2% to -0.7% this morning, the fact that the S&P 500 only fell 0.63% to close at 2,107.39 is a relative victory. Then again, stocks logged their first weekly loss in the past four, and are still within easy reach of a key technical support line. Things could still go very badly from here.
In the meantime, already went badly for United Rentals, Inc. (NYSE:URI), Potash Corp./Saskatchewan (USA) (NYSE:POT) and Abercrombie & Fitch Co. (NYSE:ANF) on Friday. You can blame analysts for the demise of all three.
Potash Corp. of Saskatchewan (POT)
Already stuck in downtrend that has been in place since 2011, Potash Corp of Saskatchewan shares broke under a developing support level at $31.93 today to rekindle the long-term pullback. When all was said and done, today’s 2.6% drop from POT pulled the stock to within reach of a new 52-week low.
The prod for the pullback was a downgrade from TD Securities. The research outfit lowered its opinion on POT stock from a “buy” to a “hold,” pointing out tepid fertilizer demand and little for the company to pound its chest about in the foreseeable future.
United Rentals (URI)
Potash wasn’t the only stock to suffer from a downgrade today. United Rentals shares stumbled more than 6% after Bank of America/Merrill downgrades URI to a full-blown “underperform,” lowering its target price to $80.
At the heart of the downgrade are tepid crude oil prices. Weak oil means drillers and refiners have less need to build infrastructure, which in turn means demand for construction equipment suppliers like United Rentals is crimped. Bank of America Merrill analyst Ross Gilardi explained:
“Recent data points suggest a growing lack of pricing power for URI, a sign of emerging oversupply in the rental fleet. A lack of upward price movement in May following a flat April and negative Q115 creates high risk of a more substantial negative guidance revision in coming months…This gives us greater conviction in our call that the aerial work platform cycle has peaked.”
Abercrombie & Fitch (ANF)
The analyst-driven routs didn’t stop at United Rentals. Abercrombie & Fitch was another victim. For ANF, though, Janney Capital did the deed.
The specifics: It tacitly appears that retailer Abercrombie & Fitch is moving away from its teen-oriented focus. While it may be a step in the right direction for the long haul, in the meantime Janney Capital’s Adrienne Yih is concerned to the overhaul could take a toll on ANF stock. Along with a downgrade to a “sell” and a new price target of $15 per share, Yih opined:
“ANF is changing nearly everything about the legacy business — product, store ops, pricing, logo/fashion content, store design, & target audience. Strategies that refocus on a new target are some of the most difficult turns to effect and can leave a brand in ‘no man’s land,’ having lost their loyal customer, but not yet connecting with their new customer.”
ANF finished the day at $20.47, down more than 7%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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