Suffice it to say, Clorox (NYSE:CLX) is roundly unloved on Wall Street right now. The pessimism may continue for a little while longer, so don’t be too early if you’re planning to buy CLX stock. It shouldn’t be too much longer before a big window of opportunity opens up, however.
Clorox is America’s famous seller of bleach and other cleaning products. Yet, the company is evidently having trouble cleaning up its reputation in 2023’s fourth quarter. So, let’s see why investors recently shunned Clorox and if there might be a buy-the-dip trade coming up in the near future.
Why Did CLX Stock Crash?
Not long ago, Clorox CEO Linda Rendle celebrated her company’s achievements in fiscal year 2023. The company delivered notable cost savings, invested in its digital transformation and worked toward its sustainability goals.
Yet, the financial markets couldn’t care less about all of that. Instead, traders hastily dumped CLX stock because Clorox acknowledged the current and long-term fallout from a cybersecurity attack which the company disclosed in August.
It appears that Clorox will incur expenses related to this security breach for a while. Reportedly, Clorox has spent $25 million to respond to the cybersecurity attack and expects to spend more in 2024.
For the company’s next quarterly financial report, Clorox expects to report adjusted earnings between break-even and a loss of 40 cents per share (in other words, an unprofitable quarter). Furthermore, Clorox anticipates a year-over-year sales decline of 23% to 28%.
Here Come the Clorox Downgrades
In an ultra-efficient market, all of this unfortunate news is surely priced into CLX stock by now. However, I don’t recommend dip-buying the shares just yet.
That’s because I expect some jittery traders to continue selling the shares for a little while longer, due to analysts’ reactions. Currently, analysts on Wall Street are piling on Clorox as if the company is about to go bankrupt:
- Raymond James: downgraded CLX stock from “outperform” to “market perform”
- Evercore ISI: cut price target from $160 to $120
- Bank of America: assigned “underperform” rating and lowered price target from $145 to $120
- Deutsche Bank: slashed price target from $155 to $136
- Wells Fargo: published “underweight” rating and reduced price target from $140 to $135
- Barclays: dropped price target from $127 to $116
As you can see, the analyst community threw the kitchen sink at Clorox. Most likely, Clorox won’t sustain as much financial and reputational damage as pessimistic investors and analysts currently envision.
Give CLX Stock a Little More Time to Absorb the Damage
Clorox made a smart move, I believe, in acknowledging the future financial fallout of the cybersecurity attack. That way, investors and analysts can panic now and get it over with.
In time, the market will come to realize that Clorox will survive and recover. Don’t expect this to happen tomorrow or next week, though. Just be patient, let the sellers exhaust themselves and when the time is right, grab a handful of CLX stock shares while they’re cheap.
On the date of publication, David Moadel 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.
