Here are this week’s downgrades to Strong Sell as determined by the POWR Ratings algorithm.
- C3.ai (AI) – an enterprise Artificial Intelligence, or AI, software provider for accelerating digital transformation
- Robinhood Markets (HOOD) – a financial technology, or fintech, company that says it is "on a mission to democratize finance for all." Via its platform, people can invest with no account minimums, buy and sell crypto, spend, save, and earn rewards and learn about investing
- First Republic Bank (FRC) – a private bank and wealth management company that offers private banking, private business banking and private wealth management services
- Spectrum Brands (SPB) – a branded consumer products and home essentials company whose brands include Tetra, Nature’s Miracle, OmegaOne, Spectracide, Cutter, Repel, Black Flag, Remington, George Foreman, Russell Hobbs, Black+Decker, PowerXL and Copper Chef
- 3D Systems (DDD) – brands itself as "the leading additive manufacturing solutions partner" that offers hardware, software, materials, and services to address applications in markets such as medical and dental, aerospace & defense, automotive and durable goods
- NexGen Energy (NXE) – a corporation focused on the development of the Rook I uranium project located in Saskatchewan, Canada into production
- Guardant Health (GH) – a precision oncology company
- Melco Resorts & Entertainment (MLCO) – a developer, owner, and operator of integrated resort facilities in Asia and Europe
Learn more about the POWR Ratings
Recent news on these stocks:
February 10
Spectrum Brands reports Q1 adjusted EPS (32c), consensus (30c). Reports Q1 revenue $713.3M, consensus $750.57M. "Our financial results for the quarter demonstrate our renewed focus on profitability, financial discipline and cost management. We are pleased that our first quarter EBITDA exceeded expectations, despite continued heavy inventory levels at retail weighing on the volume of products sold during the quarter. As we anticipated, we continue to be challenged by a difficult economic environment and face lower consumer demand compared to strong COVID related demand growth a year ago. While the volume decline and unfavorable foreign exchange were the main contributors of our EBITDA decline in the quarter, EBITDA was also negatively impacted by approximately $25 million from the sales of higher cost inventory accumulated during last year. We expect the vast majority of this higher cost inventory to be shipped in the first half of the year, leading to much better profitability in the second half of our fiscal year. Our continued focus on increasing prices, simplifying our business model and reducing costs is paying off as we operate as a leaner organization with a renewed financial discipline," said David Maura, Chairman and CEO of Spectrum Brands. Continuing, Maura commented, "Our focus on cash generation yielded positive results as we reduced our inventory by another $65 million during our first quarter, including HHI. We will maintain this focus on reducing working capital and strengthening our balance sheet throughout fiscal 23 as we navigate these uncertain economic conditions. With respect to our strategic transformation, we expect to win the DOJ lawsuit, close the HHI transaction and collect $4.3 billion of cash by no later than June 2023."
Spectrum Brands cuts FY23 revenue growth view to flat from low single-digits, FY23 consensus $3.17B. Spectrum Brands now expects flat reported net sales in Fiscal 2023, with foreign exchange expected to have a negative impact based upon current rates. Fiscal 2023 adjusted EBITDA is still expected to increase by low double-digits. From a capital structure perspective, the company is targeting a long-term net leverage ratio of 2.0-2.5 times after full deployment of HHI sale proceeds.
February 9
JPMorgan raised the firm’s price target on Robinhood to $11 from $9 and keeps an Underweight rating on the shares following the Q4 results. While revenue was "resilient" and propelled by Robinhood’s highest ever net interest revenue, transaction revenue fell short of expectations with particular weakness in equities and crypto, the analyst tells investors in a research note. The firm increased the price target on lower customer attrition and a longer account life, cites "persistent low engagement levels" for its Underweight rating.
Deutsche Bank raised the firm’s price target on Robinhood to $11 from $9 and keeps a Hold rating on the shares. The analyst views the company’s Q4 results as "mixed," with solid expense control partially offset by slightly lower than expected revenue. Management remains very disciplined on expenses despite remaining in a major growth expansion phase, says the analyst, who is encouraged with a 2023 adjusted expense outlook that is 13% below prior forecasts. The firm believes Robinhood has attractive long-term earnings growth, "albeit with a high risk profile."
February 8
Robinhood reports Q4 EPS (19c), consensus (14c). Reports Q4 revenue $380M, consensus $397.1M. Monthly active users, or MAU, decreased 0.8M sequentially to 11.4M, as customers continued to navigate the volatile market environment. Average revenues per user, or ARPU, increased to $66 from $63 in the third quarter. Assets under custody decreased 4% sequentially to $62B.
Robinhood sees FY23 operating expenses $2.38B-$2.52B. The company said, "As a result of the progress we have made on our cost reduction initiatives, including the reductions in force announced April 26, 2022 (the "April 2022 Restructuring") and August 2, 2022 (the "August 2022 Restructuring"), we expect: GAAP total operating expenses for full-year 2023 to be in the range of $2.375 billion to $2.515 billion. Total operating expenses prior to share-based compensation for full-year 2023 to be in the range of $1.420 billion to $1.480 billion. Share-based compensation for full-year 2023 to be in the range of $955 million to $1.035 billion. This includes a one-time accounting charge related to the cancellation of founder share-based compensation in the first quarter of 2023, which is expected to be roughly $485 million. We expect the rest of the 2023 SBC to be in a range of $470 million to $550 million."
Robinhood CEO Vlad Tenev and Baiju Bhatt announced that they cancelled their 2021 pre-IPO market-based restricted stock unit awards which total 35.5M of currently unvested shares. This lowers our GAAP operating costs by up to $50M per quarter starting in Q2, and it has already reduced our fully diluted share count by 3.5 percent. The company said, "We will also record a one-time accounting charge related to the cancellation of founder share based compensation in Q1 2023, which is expected to be roughly $485 million."
3D Systems announced the appointment of Dr. Rebekah Gee to the 3D Systems Medical Advisory Board, effective March 1, 2023. Dr. Gee is a recognized expert on public health policy and was elected to the National Academy of Medicine in 2017. Dr. Gee will join six other members of the advisory board who have been named since the board’s establishment in May 2022. The board’s primary mission is to provide strategic input, guidance, and recommendations for the company’s expanding efforts in regenerative medicine. Dr. Gee is the Founder and Chief Executive Officer of Nest Health, a company that seeks to overcome the challenges faced by working families with young children in accessing much-needed healthcare services by delivering whole-family, whole-person primary care to families at home, in the community, and online.
Guardant Health (GH), a precision oncology company, announced that UnitedHealthcare (UNH) or UHC now covers the Guardant360 CDx liquid biopsy test for patients enrolled in its commercial policies for all FDA-approved companion diagnostic indications. The test is used by oncologists as a companion diagnostic to assess if patients are eligible for a targeted therapy for advanced or metastatic breast or non-small cell lung cancer, NSCLC . "We are pleased that UnitedHealthcare has taken this important step to make comprehensive genomic profiling more accessible to patients with advanced lung and breast cancer," said Helmy Eltoukhy, Guardant Health co-CEO. "The biomarker identification available through the Guardant360 CDx blood test can enable oncologists to quickly identify patients who may benefit from a therapy targeted to their specific type of mutation to help improve their outcomes. We believe this important decision will help expand patient access to genomic profiling across additional tumor types and healthcare plans in the coming years."
First Republic 2.5M share spot secondary priced at $140.00. The deal size was increased to 2.5M shares from 2M shares and priced within the $139.40-$142.25 range. BofA, JPMorgan, Goldman Sachs and Morgan Stanley acted as joint book running managers for the offering.
NexGen Energy announced the commencement of an expanded 2023 exploration program designed to follow-up positive results from the 2022 exploration drill program and to test prospective areas that have been highlighted by detailed 2022 geophysical surveys. Additionally, NexGen has planned a substantial geophysical program in 2023 for drill target generation across high priority areas of NexGen’s mineral tenure in the southwest Athabasca Basin, Saskatchewan. The geophysical program includes cosmic ray muon tomography initiated in 2022 on the Patterson Corridor at NexGen’s 100% owned Rook I property as part of Ideon Technologies’ early access program for first implementation of innovative muon detecting instrumentation in boreholes.
February 7
First Republic Bank announced that it has agreed to sell 2M shares of its common stock in an underwritten public offering. First Republic intends to use the net proceeds from the offering for general corporate purposes, which may include, among other things, funding loans or purchasing investment securities for its portfolio. BofA Securities, J.P. Morgan, Goldman Sachs & Co. LLC and Morgan Stanley are serving as joint bookrunning managers.
In a joint status report issued to the U.S. District Court for the District of Columbia by the DOJ and defendant Assa Abloy (ASAZY), the parties reported "they are close to an agreement and will submit either a further status report or a proposed joint stipulation on or before February 20." Previously, Spectrum Brands (SPB) filed its answer to the lawsuit filed by the U.S. Department of Justice seeking to block the company’s sale of its Hardware and Home Improvement segment to Assa Abloy.
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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