7 Stocks to Sell if You Believe These Analyst Downgrades

Stocks to sell
  • Home Point Capital (HMPT): Market realities may end up hurting this residential mortgage originator.
  • Caci (CACI): Not every defense firm may benefit from the Ukraine conflict due to necessary restraint.
  • CarMax (KMX): The used-car market might be getting too rich for investors’ blood.
  • JetBlue Airways (JBLU): A proposed buyout makes many analysts nervous about JBLU stock.
  • Cracker Barrel Old Country Store (CBRL): Inflation poses great concerns for consumer demand.
  • Hecla Mining (HL): Some investors might view rising prices as a transitory circumstance.
  • Skyworks Solutions (SWKS): Global supply chain concerns could ground SKWS stock.

Intuitively, you might assume that investment analysts – you know, the folks that spend most of their waking hours studying and writing about both stocks to sell and buy – carry substantial influence on Wall Street. Indeed, we’ve all seen affected securities ebb and flow, depending on their outlook.

In the internet age, such influence commands respect, meaning that it’s worthwhile to consider their opinions.

But are analyst ratings the end-all, be-all of the equities sector? Not even close, according to a report from the Financial Post. In 2012, researchers at the University of Waterloo and Boston College stated that out of a study of more than 11,000 analysts from 41 countries, price target accuracy was only 18% for a three-month horizon. Thus, if analysts label one of your holdings among stocks to sell, it’s no time to panic.

Interestingly, in the same study, extending the time horizon to 12 months only yielded an accuracy improvement to 30%. Other, more recent research suggests that analysts have not improved their craft. If anything, the discipline may be regressing overall. In that context, that the so-called experts have put the below companies on their list of stocks to sell shouldn’t automatically raise alarm.

At the same time, you want to judge each case by its own merits. That prominent individuals decided to go bearish is worth closer examination.

So, do you believe that these are really stocks to sell? Read below to find out.

Ticker Company Current Price
HMPT Home Point Capital $2.97
CACI Caci International $294.32
KMX CarMax $91.79
JBLU JetBlue Airways $12.78
CBRL Cracker Barrel Old Country Store $118.49
HL Hecla Mining $7.15
SWKS Skyworks Solutions $117.79

Stocks to Sell: Home Point Capital (HMPT)

hand of person in a suit dangling keys with a house symbol on the ring. Windows overlooking city skyline in background.

Source: ImageFlow/shutterstock.com

Given that analysts have such poor outcomes with their forward guidance, I’m not willing to fork over the funds needed to get behind the paywall to understand why JMP Securities analyst Steven DeLaney recently downgraded Home Point Capital (NASDAQ:HMPT) to “market perform” from “market outperform.” OK, maybe I’m just cheap. Either way, I don’t think it’s too difficult to understand why HMPT got the downgrade.

As a leading residential mortgage originator, Home Point Capital is tied to heavy risks. Sure, I understand that real estate experts – who clearly have a bias in their assessments – believe home prices will keep going up, up and away. And they throw in housing shortage arguments hoping that it will stick. It makes sense on some levels but on others, it doesn’t.

Essentially, the ratio between housing units to married couples (the demographic most likely to buy homes on balance) has flatlined since 2012. The new normal hasn’t changed this equation much, which explains why homebuilders have been reluctant to build: eventually, there might be a housing glut. That’s probably why HMPT may later find itself as one of the stocks to sell.

Caci International (CACI)

CACI International (CACI) website on a computer screen

Source: Casimiro PT / Shutterstock.com

A U.S.-based multinational firm specializing in professional services and information technology, Caci International (NYSE:CACI) provides myriad solutions for the federal government, including defense, homeland security and intelligence. Therefore, CACI really belongs on a list of shares to acquire, not stocks to sell, especially considering Russia’s reckless decision to invade neighboring Ukraine, an action that has upset the modern global order.

But that’s not exactly how Goldman Sachs sees it, with analysts at the financial institution downgrading CACI to neutral. Possibly, the less-than-optimistic outlook for the company stems from the limited ways that the U.S. and western forces can support Ukraine. Though probably vexing to those who grew up in the shadow of the Soviet Union, Russia has threatened nuclear warfare if circumstances escalate.

It’s really unbelievable but that’s all I can say. Well, I’ll add this – I don’t agree with Goldman. This conflict shows no sign of fading and our involvement may only increase, boding indirectly well for CACI stock.

CarMax (KMX)

a Carmax (KMX) sign on a storefront

Source: Jonathan Weiss / Shutterstock.com

A tricky name among stocks to sell, CarMax (NYSE:KMX) appeared to be intriguing for battle-hardened speculators due to global supply chain disruptions. However, this narrative may be hitting the smelly stuff due to the company’s awful earnings report.

Against expectations for earnings per share of $1.27, KMX could only muster 98 cents. In fairness, the company posted revenue of $7.7 billion against a consensus target of $7.5 billion.

Clearly, that wasn’t enough to convince JPMorgan Chase, which downgraded KMX to neutral with a $110 price target. KMX is priced at $91.79 at the time of this writing, so there’s about 28% of upside baked into the bearishness. Still, investors will likely consider key metrics, such as CarMax’s year-to-date loss of over 26% as deciding factors.

Personally, I’m torn. Conservative investors will probably want to put KMX on their list of stocks to sell. However, CNBC noted that used-car prices remain lofty due to low inventories of new cars. Since CarMax is the used-car king, it might surprise the market.

Stocks to Sell: JetBlue Airways (JBLU)

jetblue (JBLU) airplane on a runway

Source: Roman Tiraspolsky / Shutterstock.com

Another name that has popped up in discussions about stocks to sell, JetBlue Airways (NASDAQ:JBLU) is also a contested idea. From the optimist’s perspective, I can appreciate that cabin fever has set in because of two years or so of coronavirus lockdowns and mitigation measures. Consumers want to reclaim their normal activities, particularly fun activities like vacationing or catching up with old friends.

Moreover, international locations are still spotty, which cynically serves JBLU stock well. Since the underlying company is a discount carrier, it primarily operates in the domestic realm. Plus, with so much craziness in the world, perhaps going too far away from home isn’t ideal.

Nevertheless, Raymond James downgraded JetBlue, in fairness for understandable reasons. Essentially, analysts are worried about the proposed buyout of Spirit Airlines (NYSE:SAVE), drawing in major uncertainties. It’s a substantial risk too in that the passenger load factor was gutted during the worst of the Covid-19 pandemic, meaning that it could take some time before the industry fully recovers.

Cracker Barrel Old Country Store (CBRL)

Cracker Barrel gift card in a hand over a shelves with different giftcards

Source: dennizn / Shutterstock.com

A peculiar name that has popped up on some folks’ radar of stocks to sell, Cracker Barrel Old Country Store (NASDAQ:CBRL) specializes in gift stores and restaurants. As you can guess from its name, Cracker Barrel features a traditional Americana ambiance. In the past, the company has courted controversy but management has really aspired to promote a positive and inclusive image.

Still, those efforts weren’t enough to save CBRL stock from a price downgrade. Loop Capital dropped its price target to $113 from $132. More recently, Citigroup initiated coverage on CBRL, ranking it as one of the stocks to sell with a $97 price target.

What’s with the lack of confidence in the comfort food provider? Unfortunately, the analysts – no matter what you think of their overall accuracy – may be onto something here. Consumer sentiment is at lows not seen since the Great Recession, which makes Cracker Barrel a questionable long-side idea.

Hecla Mining (HL)

One bar of silver has been pulled out from a larger pile.

Source: Shutterstock

A precious metals firm and billed as the largest primary silver producer in the U.S., Hecla Mining (NYSE:HL) has always enjoyed strong support from the goldbug community. You know what I’m talking about – the “cash is trash” crowd. Well, HL has been absolutely killing it so far in 2022, gaining 40%. Still, is the ample momentum a sign to go contrarian and put it on a list of stocks to sell?

Just recently, Roth Capital downgraded HL to neutral, although the price target went to $6.50 from $6.25. Part of the reasoning could involve the concept that some analysts see inflation as a transitory issue. Or, the market could have already priced in the negativity of inflationary pressures.

You should make your own decision on this matter. Personally, though, I don’t think HL should be demoted to being one of the stocks to sell. Since the Fed and policymakers have few (if any) good options on the table, inflation could remain quite high for the foreseeable future.

Stocks to Sell Skyworks Solutions (SWKS)

the Skyworks (SWKS) website is loading on a smartphone

Source: madamF / Shutterstock.com

A semiconductor firm specializing in advanced chips for radio frequency applications and mobile communications systems, Skyworks Solutions (NASDAQ:SWKS) might not be a household brand in the vein of Apple (NASDAQ:AAPL) or similar sector giant. However, Skyworks undergirds the consumer electronics revolution, providing Apple with the components it needs to manufacture its latest gizmos and gadgets.

Despite this street cred, B. Riley analyst Craig Ellis downgraded SWKS stock to “neutral” from “buy” with an adjusted price target of $138 (previously, it was $175). To be fair, even with this adjusted forecast, SWKS wouldn’t automatically classify as one of the stocks to sell as it would represent a nearly 13% lift from current prices.

Still, a 13% gain may not be much for accepting such a risk in an inflationary environment. Previously, other analysts downgraded SWKS due to concerns about a secular slowdown in premium smartphones. Today, with an unpredictable war erupting along with global recession anxieties, it might be better to play it safe with SWKS and limit your exposure.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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