There are not many things that are more disheartening to an investor than seeing the value of a particular holding move down sharply. And it can be even more concerning when downward price action coincides with a downgrade from the analyst community.
However, just as an analyst upgrade is not always as bullish as it may first seem so too an analyst downgrade is not always an indicator of bearish sentiment. That’s why once the initial price drop happens, it’s a good time to re-evaluate the stock for yourself. In some cases, analysts are still bullish on a stock, just not as bullish as they were before. This can create an opportunity for investors to start or add to a position while a stock is oversold.
Amazon
Amazon (NASDAQ:) has had 16 downgrades in the last 90 days which corresponds to the company’s last earnings report. Amazon’s strong e-commerce business was essential during the pandemic. However, in the last 12 months, investors have been curbing their habit to buy AMZN stock. For all of 2021, the stock is up just 3%. And in the last month, the stock is down 10% since it reached its 52-week high in June 2021.
Of course, Amazon is more than its e-commerce business. Still, I don’t believe that anyone would suggest Amazon will become less important in our day-to-day lives. But that doesn’t mean that AMZN stock is a great investment.
But in Amazon’s case it still looks like a good investment. Even after 16 analysts have downgraded the stock either by rating, price target, or both the consensus price target for AMZN stock remains at $4,161, a 25% gain from the stock’s price as of this writing. One reason for that should please investors who put value on fundamental metrics such as sales-to-capital ratio. Amazon comes in at a 4.02 which means that every $1 dollar that is invested in the company delivers $4 in revenue.
Federal Express
FedEx (NYSE:) is another pandemic winner that has recently failed to reward investors. In 2021, the stock is down 12% and since hitting its 52-week high in June, the stock is down 30%. Inflation may be the culprit. Specifically, the company is still delivering strong revenue. But rising labor costs are eating into profitability.
That’s not a dynamic that’s likely to improve anytime soon. But this may be another example of a sell-off that’s simply overdone. Analysts still give FDX stock a consensus price target of $322.86. That would be slightly above the stock’s 52-week high which means that analysts still project a gain of nearly 30% from the stock’s current level.
And one more thing going for FedEx is a dividend which the company has increased for each of the last 19 years including a three-year dividend growth rate of over 36%.
The Boston Beer Company
The Boston Beer Company (NYSE:) has suffered the sharpest sell-off. Since the beginning of the year, SAM stock is down 48.8%. The culprit it seems is lack of growth in the hard seltzer category due to both expansive competition and a subtle shift in consumer tastes.
Another issue appears to be the uneven pace of on-premise sales. This is leaving the company hesitant in its guidance and analysts hesitant to believe its guidance. is facing difficult comparisons with a year ago when consumers were stocking their pantries. For now,
While a part of me chuckles at the decline in what I perceived, perhaps correctly, to be a fad in hard seltzers, it’s no laughing matter to SAM stock investors. Of the three stocks in this article, SAM is the only one that has a hold rating, and short interest is on the rise. Wlth revenue concerns likely to linger for at least a couple of quarters, the stock may have further to fall.
However, it also has a consensus price target that suggests a potential 59% upside. So if investors want to pull the trigger, they may do worse than buying shares of a company with a proven record of delivering category-beating earnings growth.