April Price Target Cuts: 3 Stocks That Analysts Are Losing Faith In


  • In this uncertain market, staying informed about analyst downgrades is pivotal to avoid potential investment pitfalls.
  • GameStop (GME): GameStop’s persistent revenue decline across all segments underscores deep-seated challenges, with no clear turnaround in sight.
  • Lumen Technologies (LUMN): Lumen’s significant revenue drop in recent quarters and a heavy debt load intensify its financial struggles amidst a bleak outlook.
  • L.B. Foster (FSTR): Despite attempts to pivot towards higher-margin areas, L.B. Foster’s sustained negative profitability metrics and strategic challenges point to serious operational and financial issues.
Analyst Downgrades - April Price Target Cuts: 3 Stocks That Analysts Are Losing Faith In

Source: shutterstock.com/eamesBot

With all the turbulence in the stock market at this time, it’s imperative to consider the
impact of analyst downgrades to minimize risk.

Following a momentous AI-powered rally in the past year or so, the market’s taking a breather. Moreover, with inflation coming in hot this month again, expect the stock market to shed more of its gains in the near term. Hence, with all the uncertainty, investors must consider price target cuts from Wall-Street. With that said, here are three stocks with analyst downgrades you’d want to steer clear of at this time.

Analyst Downgrades: GameStop (GME)

GameStop (GME) sign on side of building in blue early morning light
Source: shutterstock.com/EchoVisuals
  • Previous Wall-Street Rating: ‘Sell’
  • Current Wall-Street Rating: ‘ Strong Sell’

GameStop (NYSE:GME) is the original meme stock and continues exhibiting a downward trend. Its stock tanked more than 50% last year, with its top-line growth firmly in the red. 

The company posted a small profit after three loss-making quarters, but the broader issues revolve around plummeting sales. Revenues were down more than 20% in the fourth-quarter (Q4) to $1.79 billion, significantly behind analyst estimates of $2.05 billion. Some may be celebrating higher operating earnings in Q4 at $55.2 million, but this was mostly linked to the steep drop in selling, general, and administrative expenses (SG&A). It cut SG&A expenses by a hefty $94 million during the quarter, driven primarily by letting off employees and limiting its marketing.

With the video game retailer’s sales dropping across every segment for the past several years, it’s evident that GME stock is going nowhere. Belt-tightening measures are unlikely to improve the company’s overall business, which continues to dwindle each quarter.

Lumen Technologies (LUMN)

A magnifying glass zooms in on the website for Lumen Technologies (LUMN).
Source: Postmodern Studio / Shutterstock.com
  • Previous Wall-Street Rating: ‘Hold’
  • Current Wall-Street Rating: ‘Sell’

Lumen Technologies (NASDAQ:LUMN) is a telecommunications business offering network services and cloud solutions, among other related offerings. Its stock took a hammering at the stock market last year, losing over 43% of its value on multiple headwinds. Revenues have been plummeting rapidly, while recent debt restructuring efforts have resulted in higher interest costs.

Wall-Street remains pessimistic over its long-term prospects, forecasting a substantial revenue slowdown for the next few years. A turnaround for its business hinges on its ability to reverse its negative revenue growth trend while managing its debt without further damaging its financial health.

Earnings in Q4 included sales of roughly $3.5 billion, down substantially from $4.8 billion a year ago. Moreover, the firm lost close to $2 billion for the quarter while struggling with its massive debt load. Therefore, it’s best to offload LUMN stock to minimize your downside risk.

L.B. Foster (FSTR)

Image of the foundation and frame of a house
  • Previous Wall-Street Rating: ‘Hold’
  • Current Wall-Street Rating: ‘Sell’

L.B. Foster (NASDAQ:FSTR) provides construction materials and related services for industrial and infrastructure projects.

Like other companies discussed in the article, it faces major challenges, including stagnating top-and-bottom-line growth and a hefty debt load.

Performances in some of its key segments, including Steel Products, have been lackluster due to strategic divestitures.

Its management is looking to turn things around, though, focusing on higher-margin, higher-growth areas, but these results have yet to be convincing. Moreover, its profitability metrics are firmly in the red and have been for a long time. For instance, the average net income margin over the past five years is at a negative 0.50%. Similarly, its return on total assets over the same period is at a negative 0.86%. Additionally, analysts’ earnings estimates should have been included by a considerable margin in four out of the past six quarters. Therefore, the company is up against multiple issues at this time, offering minimal upside ahead.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/april-price-target-cuts-3-stocks-that-analysts-are-losing-faith-in/.

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