The stock market’s rebound following a disastrous opening to 2016 has been impressive. However, some analysts believe that the market bounce has created selling opportunities in popular stocks GoPro (GPRO), U.S. Steel (X) and Mobileye (MBLY).
Within the last month, Wall Street analysts have said they now see at least 35% downside to each of these names. Here’s a rundown of the bear cases:
GoPro (GPRO)
GPRO is unquestionably one of the most hotly-debated young companies on Wall Street. GPRO shares were down more than 45% year-to-date as of early February. But GPRO recently spiked 20% after the company announced that former Apple (AAPL) design veteran Danny Coster is joining the company.
Piper Jaffray analyst Erinn Murphy, however, was not impressed. In addition to criticizing GPRO’s recent “air pocket of innovation,” Murphy pointed out that camcorder ownership is in decline. Less than 1% of teens placed GPRO cameras on their wish-list in Piper Jaffray’s recent semi-annual Teens Survey.
On April 15, Murphy maintained her “Underweight” rating on GPRO and her $7 price target, which suggests 46% downside for the battered wearable action camera maker.
U.S. Steel (X)
U.S. Steel is up a staggering 151% so far in 2016, a major rebound following an 82% sell-off in 2014 and 2015. While U.S. Steel shareholders are hoping that the worst of the commodity bear market is now behind them, UBS analyst Matt Murphy believes that the stock’s meteoric 2016 rise is too much too soon.
Despite the company’s efforts to boost cash flow in the near-term, Murphy remains concerned over debt. On April 8, he wrote that if commodity prices remain depressed, “we become increasingly concerned about X’s ability to generate sufficient cash flow to service and pay down debt.”
Despite raising his price target from $8 to $12, the new target still implies 40% downside from current levels. Murphy also downgraded U.S. Steel stock from “Neutral” to “Sell.”
Mobileye (MBLY)
Some analysts are known for short-selling, and Citron Research’s Andrew Left is one of them. Left’s latest target is MBLY.
In an April 13 report, Left called out MBLY’s sky-high valuation, saying the company’s “market positioning has become increasingly precarious.”
According to Left, MBLY’s place in the autonomous driving market isn’t nearly as unique and secure as many investors believe. He adds that the huge amount of competition in autonomous driving technology has led to increasing commoditization, which leaves MBLY’s premium valuation unjustified.
Left even takes it one step further, calling MBLY “the most outrageously overpriced, overhyped semiconductor stock ever.”
As an example, he notes that Mobileye projected 2016 revenue of $726 million back on 2012, but is now only projecting $350 million in revenue this year. However, since 2012, MBLY’s stock is up more than 1,000%. (It went public in 2014 but was valued on the private markets in 2012).
Finally, Left points out both the massive amount of MBLY insider selling and the number of Wall Street analysts that have lowered forecasts recently.
Citron values MBLY stock at $11, implying an incredible 72% downside from current levels.
Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.
