Stryker (NYSE:SYK) stock has been in focus today as one short seller took aim at the medical devices company. SYK stock sunk approximately 4% in earlier trading, although shares have since recouped their losses.
Much of the negative sentiment that is brewing in today’s market appears to be linked to the prospect of higher interest rates. Higher rates generally bring down valuations for all stocks.
For investors, the pandemic brought rock-bottom interest rates that forced them to look for growth. With yield in fixed income disappearing, many investors felt they had no alternative other than equities. And on the growth front, Stryker has been a great choice.
With elective surgeries picking up as Covid-19 hospitalizations have continued to trend down, optimism around this company should be growing. However, not all investors share the same view.
Let’s dive into what’s causing investor concern with Stryker today.
Short Report Hits SYK Stock Today
Renowned short seller Spruce Point Capital has tapped Stryker as its next short idea. In a short report released today, Spruce Point focused on some key issues it believes could lead to considerable downside. That is, downside of as much as 70%, according to this report.
Spruce Point’s view is that Stryker has perhaps less-favorable financials than what is being disclosed. This report argues that allegedly questionable accounting practices and imprudent acquisition activity are key reasons to avoid SYK stock. Accordingly, the short seller is requesting that independent forensic investigators step in to verify these claims.
Now, Stryker maintains that the company is being as transparent as it can be with investors. Additionally, acquisitions aimed at boosting growth and delivering long-term value seem like a good idea. Investors have tended to agree with this view, considering SYK stock is trading near its all-time high.
That said, insider selling from the Stryker family is one of the factors Spruce Point believes is an indicator perhaps things aren’t as great as they seem. Input inflation, margin compression and unsustainable growth are other factors Spruce Point believes investors should focus on with Stryker.
Indeed, SYK stock is likely to be a hot one as investors digest this report. For now though, it appears the market is brushing off these concerns.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
