With an end to the Greek debt debacle still nowhere in sight in contrast with another strong uptick in consumer spending last month, traders weren’t quite sure what to do with stocks… and it showed.
A strong open turned red around mid-day, and the bears never looked back. The S&P 500’s close at 2,102.31 was 0.3% worse than Wednesday’s close.
There was no uncertainty for Centurylink Inc. (NYSE:CTL), Netflix, Inc. (NASDAQ:NFLX) and Cree, Inc. (NASDAQ:CREE) though. This trio was destined for red ink right out of the gate, as analysts pounced on each.
Centurylink (CTL)
Despite its best efforts to do so during Wednesday’s analyst day event, technology services outfit Centurylink just couldn’t impress attendees. In fact, the event was so disappointing, one analytic firm downgraded CTL today following the meeting, sending shares considerably lower.
JP Morgan was the research house in question. Morgan lowered its opinion on CTL from “overweight” to “neutral,” and simultaneously lowered its target price on Centurylink shares from $42 to $35. JP Morgan analyst Philip Cusick was mostly concerned about competitive pressure on the customer premises equipment front.
CTL closed more than 6% lower on Thursday.
Cree (CREE)
On the surface, a stock buyback and a restructuring plan that will make the company more fiscally efficient seems as if it would a good thing for Cree. Neither the market nor analysts were thrilled with the way LED equipment maker CREE is overhauling itself, though, which sent the stock down a sharp 10% on Thursday.
The company announced the restructuring on a conference call held Wednesday evening; the intent is to “reduce excess capacity and overhead to improve the cost structure moving forward” in the shadow of an LED market that hasn’t supported strong prices.
Analysts were understandably concerned, with many of them lowering their ratings and/or target price on CREE shares. Raymond James analyst Hans Mosesmann remains particularly worried about Cree, noting:
“We reiterate our Underperform rating on CREE following the negative June quarter preannouncement. We caution investors that could use the current reset as a catalyst to buy shares on the notion that all is fixed/solved for the company. The LED component business overall is in secular decline… right-sizing the LED product business — while a tactical necessity — doesn’t address Lighting and overall component industry headwinds, in our view.”
Netflix (NFLX)
Already overextended — and vulnerable — on news that a stock split was soon on the way, Netflix shares tumbled 2% on Thursday after not one but two analytical firms announced a surprise downgrade of NFLX shares.
Societe Generale got the ball rolling, dishing out a complete 180-degree turnaround on its opinion of NFLX, downgrading the stock from a “buy” to a “sell.” Citigroup was more than happy to jump on the bandwagon, too, lowering its opinion from a “buy” to “neutral.” Societe Generale’s Christopher Cherblanc said Netflix shares were already “priced to perfection that may or may not be achievable, while Citigroup’s Mark May similarly explained “We feel at this level the valuation is fully reflecting the positive trends that Netflix is seeing.”
Both analysts still essentially liked Netflix and its business model, but with NFLX shares up nearly 100% for the year so far, May and Cherblanc were understandably concerned the new lofty price simply might not hold up.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
