Sell these stocks now, proven algorithm says

Power utility, eVTOL aircraft maker headline this week’s list of "F" rated Strong Sells

Here are this week’s downgrades to Strong Sell as determined by the POWR Ratings algorithm. 

• Algonquin Power & Utilities (AQN) – a diversified international generation, transmission, and distribution utility with over $17B of total assets committed to providing energy and water solutions through its two business groups, the Regulated Services Group and the Renewable Energy Group
• Eve Holding (EVEX) – a company developing electric vertical take-off and landing, or "eVTOL," aircraft that says it is backed by Embraer’s (ERJ) "more than 50-year history of aerospace expertise" and "dedicated to accelerating the Urban Air Mobility ecosystem"
• Geron (GERN) – a late-stage biopharmaceutical company pursuing therapies intended for patients living with hematologic malignancies
• Enviva (EVA) – a producer of industrial wood pellets that owns and operates ten plants with a combined production capacity of approximately 6.2 million metric tons per year
• Paysafe (PSFE) – operator of a specialized payments platform geared toward mobile-initiated transactions, real-time analytics and the convergence between brick-and-mortar and online payments
• Verve Therapeutics (VERV) – a clinical-stage genetic medicines company that says it is "pioneering a new approach" to the care of cardiovascular disease
• ACV Auctions (ACVA) – a provider of a digital marketplace for wholesale vehicle transactions and data services
• Compass (COMP) – a technology-enabled residential real estate brokerage that identifies itself as "the largest residential real estate brokerage in the United States"
• KKR (KKR) – a global investment firm that offers alternative asset management as well as capital markets and insurance solutions
• Roku (ROKU) – operator of a platform for streaming TV content publishers and advertisers whose streaming players and TV-related audio devices are available in the U.S. and in select countries through direct retail sales and licensing arrangements with service operators
• Xometry (XMTR) – operator of an online marketplace connecting enterprise buyers with suppliers of manufacturing services
• Bill.com (BILL) – a provider of cloud-based financial operations software for small and midsize businesses
• Guardant Health (GH) – a precision oncology company
• Braze (BRZE) – operator of a customer engagement platform that powers interactions between consumers and brands

Learn more about the POWR Ratings

Recent news on these stocks:

January 12

Algonquin Power & Utilities hosted an investor update, where President and CEO, Arun Banskota, and CFO Darren Myers, provided an update on the actions the company is taking to support its long-term energy transition strategy. In connection with the investor update call, the company highlighted that AQN intends to further support its financial foundation, funding growth through a commitment to a BBB credit rating. "AQN is focused on a balanced funding plan with no new common equity financings expected through the end of 2024 and reduced capital spending intensity. The Company currently has a strong liquidity position. Effective for its first quarter 2023 dividend, AQN intends to lower its quarterly dividend from $0.1808 to $0.1085 per common share, improving financial flexibility. AQN will continue distributions to shareholders with a sustainable dividend that is expected to grow in general alignment with Adjusted Net Earnings per share. AQN continues to pursue the Kentucky Power Acquisition. Leveraging AQN’s demonstrated track record of operational excellence, the Company’s pending acquisition of Kentucky Power Company and AEP Kentucky Transmission Company is expected to generate long-term value for customers and investors alike. On December 15, 2022, the U.S. Federal Energy Regulatory Commission denied approval of the Kentucky Power Acquisition as filed. The parties plan to continue to seek FERC approval of the Kentucky Power Acquisition. AQN intends to refocus its portfolio by targeting approximately $1 billion of additional asset sales. Proceeds from the next phase of renewable asset recycling and additional asset sales are expected to be used to pay down debt and continue to fund growth. AQN will be suspending its dividend reinvestment plan for its common shares. Effective for the first quarter 2023 dividend, shareholders participating in the DRIP will begin receiving cash dividends. If the Company elects to reinstate the DRIP in the future, shareholders who were enrolled in the DRIP at its suspension and remain enrolled at reinstatement will automatically resume participation in the DRIP. AQN expects Adjusted Net Earnings per common share, excluding gains or losses on asset sales, of $0.55 to $0.61 for the 2023 fiscal year," the company stated.

Oppenheimer analyst Ken Wong lowered the firm’s price target on Bill.com to $150 from $180 and keeps an Outperform rating on the shares. The analyst also reduced estimates across nearly his entire coverage to reflect the weak macro climate, lengthening sales cycles, and expectations for tighter IT budgets. Wong sees stabilizing FX and supply chain as potential sources of relief to growth headwinds.

Jefferies analyst Andrew Uerkwitz downgraded Roku (ROKU) to Underperform from Hold with a price target of $30, down from $45. A "significantly slower" digital advertising market is not reflected in near-term consensus expectations for Roku while the long-term trajectory of the business "remains unclear," Uerkwitz tells investors in a research note. The analyst expects Netflix (NFLX) and Disney+ (DIS) to capture the majority of incremental connected TV ad spend in 2023 and 2024. Excluding the two new entrants, the industry is growing low single digits, says Uerkwitz.

January 11

BTIG analyst Matthew VanVliet initiated Braze with a Buy rating and $34 price target. The analyst believes Braze’s ability to allow its 1.7K+ customers to "adapt in real time to engage effectively with their consumers to drive a specific call to action is a testament to the growing demand this space will see in the coming years," and feels that, overall, Braze is in the "early stages" of operating in a $10B TAM. VanVliet also noted that Braze has had notable companies including HBO, Sweetgreen, and Grubhub select its platform.

KKR and Altavair L.P. announced that KKR is making an additional $1.15B commitment to expand its global portfolio of leased commercial aircraft in partnership with Altavair. The investment will come from KKR’s credit and infrastructure funds. KKR has deployed and committed $1.7B of capital into aircraft deals since forming a partnership with Altavair and acquiring an interest in the company in 2018. KKR, in partnership with Altavair, has acquired more than 90 commercial and freighter aircraft through a variety of transactions, including lessor trades, airline direct used and new delivery sale leasebacks, structured transactions and passenger-to-freight conversions and has successfully leased more than 75% of the portfolio to tier-one airlines and operators around the world. "We are thrilled to deepen our footprint in aircraft leasing through this new commitment, which underscores the conviction that we have in this space and our confidence in Altavair as a partner," said Dan Pietrzak, KKR Partner and Co-Head of Private Credit. "We look forward to growing our portfolio further to support the fleet needs of airlines and operators around the world."

Geron (GERN) highlighted multiple additions to its senior commercial leadership team, as it prepares for the potential commercialization in the U.S. market of imetelstat, a first-in-class telomerase inhibitor. Key additions include seasoned professionals with deep operational and launch experience in Trade & Channel Relations, Market Access, Marketing, Medical Affairs and Sales. Peter Avalos, M.B.A., M.S., Vice President, Trade and Channel Relations. Peter Avalos joined Geron in December 2022 from Daiichi Sankyo (DSNKY). Nishan Sengupta, Ph.D., Vice President, Market Access and Pricing. With over 20 years of experience working in the healthcare industry across both the drug and medical device sectors, Nishan Sengupta was a core brand team member for multiple global and U.S. commercial launches, including Imbruvica, Xarelto and Humira. Lorraine Shui, Pharm.D., M.B.A, Vice President, Marketing. Prior to joining Geron in October 2022, Lorraine Shui was the U.S. brand lead for sickle cell marketing at Novartis Pharmaceuticals Corporation. Denise Meyer, B.Pharm., Pharm.D., M.B.A., Vice President, Medical Affairs. Since August 2021, Denise Meyer has served as Geron’s Vice President, Medical Affairs. Scott Hutson, Vice President, Sales. With over 20 years of experience in commercial organizations across various oncology areas, including hematology, solid tumors and immuno-oncology, Scott Hutson has led and participated in numerous commercial launches in the U.S. for many successful blockbuster drugs, including Procrit, Zytiga, Xtandi, Tagrisso, Imfinizi and Enhertu.

January 10

Mizuho analyst Siti Panigrahi initiated coverage of Bill.com with a Neutral rating and $105 price target. While encouraged by the company’s estimated $25 trillion U.S. business-to-business payment opportunity and secular tailwinds driving bill pay adoption and monetization post COVID, the analyst believes the greenfield small business payment market remains increasingly competitive. This could represent a potential medium-term risk to Bill.com, and the stock’s current valuation already reflects its near-term growth, Panigrahi tells investors in a research note.

JMP Securities analyst Devin Ryan lowered the firm’s price target on KKR to $72 from $74 and keeps an Outperform rating on the shares as part of a broader research note on Investment Banks & Brokers, Alternative Asset Managers, and Financial Technology. Q4 is expected to represent another generally tough quarter for most companies in his coverage while the market remains focused on assessing the effect of central bank policy on both inflation control and economic implications in the early part of 2023, the analyst tells investors in a research note. Ryan adds however that following a particularly tough year, the bar for alternative asset managers is becoming increasingly attractive.

January 9

Guardant Health sees Q4 revenue $124M-$127M , consensus $122.68M. Reported 36,000 tests to clinical customers and 8,200 tests to biopharma customers, an increase of 41% and 24%, respectively Cash, cash equivalents and marketable debt securities were $1B as of December 31. "We are very pleased with the strong finish to 2022 that enabled us to post annual volume growth for both clinical and biopharma above 40%, and believe we are well positioned for continued strong double-digit revenue growth in 2023." said Helmy Eltoukhy, co-founder and co-CEO. "During the fourth quarter we delivered on a long-term ambition with the positive readout of our ECLIPSE trial. We are thrilled with the strong and positive feedback expressed by guideline members, key opinion leaders, and patient advocacy leaders about the performance of the Shield test in the ECLIPSE trial," said AmirAli Talasaz, co-founder and co-CEO. "Fueled by this success, we will expand this test to many other cancer types, including lung cancer, the leading cause of death from cancer."

Guardant Health sees FY22 revenue $447M-$450M, consensus $445.24M. For the twelve-month period ended December 31, as compared to the same period of 2021: Revenue of between $447M and $450M, an increase of 20%: Reported 124,800 tests to clinical customers and 26,000 tests to biopharma customers, an increase of 42% and 40%, respectively

B. Riley analyst Kalpit Patel raised the firm’s price target on Geron to $5 from $4 and keeps a Buy rating on the shares. The company "hit a homerun" on overall efficacy with the Phase III trial of imetelstat, Patel tells investors in a research note. The data bolsters the analyst’s view on imetelstat’s profile in treating lower-risk myelodysplastic syndromes.

Wells Fargo analyst Jeff Cantwell lowered the firm’s price target on Bill.com to $180 from $195 and keeps an Overweight rating on the shares. The analyst thinks 2023 will be more challenging fundamentally for his coverage versus 2022. Though he expects a challenging market environment in the first half of the year, Cantwell thinks slowing inflation plus a Fed pivot will drive "risk-on" sentiment in the space by the second half.

Piper Sandler analyst Brent Bracelin lowered the firm’s price target on Bill.com to $140 from $165 and keeps an Overweight rating on the shares. 2023 marks the beginning of a mid-cycle moderation period for the estimated $385B cloud industry, where growth could fall below 20% after a decade of hypergrowth, Bracelin tells investors in a research note. The analyst is "proactively lowering estimates" on 18 stocks on recessionary headwinds but also believes valuations factor in a high-degree of disruption. He calls Adobe his top large-cap idea, MongoDB his top mid cap idea, and Procore (PCOR) his top small cap idea.

About "Sell these stocks now"

Each week, The Fly will announce the newest downgrades to Strong Sell in StockNews.com’s POWR Ratings algorithmic model.

This Fly exclusive recap identifies stocks with over a $1B market capitalization that have been downgraded this week to the Strong Sell, or "F," rating in the service’s proprietary model that analyzes 118 different factors, each of which contribute a little to the stock’s predicted likelihood of underperformance. A bell curve distribution of StockNews.com’s ratings shows that only the top 5% of the over 5,000 stocks rated by the system are assigned a "Strong Buy," or "A," rating while the bottom 5% are assigned a Strong Sell. The F-rated stocks would have tumbled an average of 18.98% a year since 1999, according to StockNews.com.

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