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Sell these stocks now, proven algorithm says
The Fly

Sell these stocks now, proven algorithm says

Reported Tesla target, video game 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. 

  • Take-Two Interactive (TTWO) – a developer, publisher, and marketer of video games, principally through Rockstar Games, 2K, Private Division, and Zynga, whose products are designed for console systems, personal computers, and Mobile, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms, and cloud streaming services
  • Sigma Lithium (SGML) – a Canadian company that is currently in construction at its wholly owned Grota do Cirilo Project in Brazil with a stated goal to "power the next generation of electric vehicle batteries with environmentally sustainable and high-purity lithium"
  • Braze (BRZE) – operator of a customer engagement platform that powers interactions between consumers and brands
  • Melco Resorts & Entertainment (MLCO) – a developer, owner, and operator of integrated resort facilities in Asia and Europe
  • Sunrun (RUN) – a home solar, battery storage, and energy services company
  • Signify Health (SGFY)- operator of a health care platform with a network of more than 10,000 clinicians across all 50 states that has agreed to be acquired by CVS Health (CVS) in a deal representing a total transaction value of approximately $8B
  • Aurora Innovation (AUR) – a developer of a self-driving system and driver-as-a-service products for trucking and ride-hailing
  • Apellis Pharmaceuticals (APLS) – a biopharmaceutical company that is exploring complement medicines for people living with rare, retinal, and neurological diseases and boasts the approval of "the first and only targeted C3 therapy"
  • 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

Learn more about the POWR Ratings

Recent news on these stocks: 

February 23

BMO Capital lowered the firm’s price target on Sunrun to $34 from $39 but keeps an Outperform rating on the shares after its Q4 results and guidance. The company’s 2023 outlook was meaningfully better than the whisper numbers from investors who had been bearish on the U.S. residential solar market, the analyst tells investors in a research note. The firm also states that Sunrun’s forecast "importantly includes no incremental upside" baked in from the Inflation Reduction Act ITC bonus adders.

BofA raised the firm’s price target on Sunrun to $46 from $40 and keeps a Buy rating on the shares, arguing that it is "frankly getting hard to argue against the numbers" when looking at the company’s reported $16,400 subscriber value in Q4. The analyst admits "reporting remains confusing and what goes into the subscriber value metric is opaque," but contends in a note partially titled "statement quarters continue as margins finally find stability" that Sunrun has "proven out that its business model is an inflation beneficiary."

Apellis 3.17M share spot secondary priced at $63.00. The deal size was increased to $350M from $300M and priced below last closing price of $65.82. JPMorgan, Goldman Sachs and Evercore ISI are acting as joint book running managers for the offering.

Oppenheimer lowered the firm’s price target on Sunrun to $49 from $70 and keeps an Outperform rating on the shares. With the company delivering strong Q4 results and guiding to 10%-15% annual MW deployment growth in 2023 while adjusting to 6% discount rate for its subscriber value capture and asset value calculations, the firm expects a mixed reaction from investors. Oppenheimer believes MW growth guidance is better than feared but that financing rates fluidity is driving ongoing uncertainty of value capture for Sunrun.

February 22

Sunrun reports Q4 GAAP EPS 29c, consensus (5c). Reports Q4 revenue $609.15M, consensus $593.15M. Customer additions were 37,359, including 27,493 subscriber additions. "Sunrun is poised to gain market share and help lead the country towards a clean energy future. Our focus on becoming faster, better and stronger continues to deliver tremendous value to our customers and shareholders. Our team is operating at record-levels of efficiency in Q4 while also breaking records with robust early-funnel sales growth in January," said Mary Powell, Sunrun’s Chief Executive Officer. "Sunrun is particularly well positioned in the current economic environment, where our subscription model is advantaged. Our immense operating scale and customer reach, along with our strengths being the leader in storage solution procurement, complex system design expertise, and advanced installation capabilities, are driving considerable differentiation in the marketplace, both as the platform company attracting the best sales talent and our ability to offer the best value to customers. I am confident 2023 will be a break-out year for Sunrun as we extend our market-leading position."

As part of its Q4 report, Sunrun stated: "Management’s focus is on leading the market through sustainable and profitable growth, prioritizing unit cash generation capabilities, while prudently managing working capital needs. Management expects Solar Energy Capacity Installed growth to be in a range of 10% to 15% for the full year 2023. Management currently sees more upside opportunity than downside risk to achieving growth in this range and anticipates market share gains in 2023. Management expects Solar Energy Capacity Installed growth to be in a range of 215 to 225 Megawatts in the first quarter of 2023. Management expects to update the discount rate assumption used to calculate Subscriber Value, Gross Earning Assets and Net Subscriber Value from 5% to 6%, commencing with the first quarter 2023 reporting. As such, Net Subscriber Value guidance is being provided assuming a 6% discount rate. Net Subscriber Value is expected to be approximately $10,000 in the first quarter and to increase sequentially throughout 2023."

Chanos says still short Sunrun. Jim Chanos discussed his Sunrun short position while being interviewed on CNBC.

Apellis Pharmaceuticals announced that it has commenced an underwritten public offering of $300 million of its common stock. All of the shares of common stock and pre-funded warrants are being offered by Apellis. In addition, Apellis expects to grant the underwriters a 30-day option to purchase additional shares of its common stock in an amount equal to 15% of the securities offered in the public offering. J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Evercore Group L.L.C. are acting as joint book-running managers for the offering. Robert W. Baird & Co. Incorporated and Raymond James & Associates, Inc. are acting as co-managers for the offering.

Raymond James raised the firm’s price target on Apellis to $139 from $123 and keeps a Strong Buy rating on the shares. Syfovre’s label affords many commercial tailwinds, including a large indicated GA population, its first mover advantage, the flexible dosing range in 25-60- day intervals, and clean safety, the analyst tells investors in a research note. Syfovre will be commercially available in March but Apellis expects meaningful uptake to occur after the permanent J code goes into effect this October, Raymond James says.

February 21

Apellis reports Q4 EPS ($1.50), consensus ($1.57). Reports Q4 revenue $22.66M, consensus $24.19M. "2022 was another year of remarkable execution for Apellis as we moved closer toward our goal of bringing SYFOVRE to patients with GA worldwide and continued to elevate the standard of care in PNH with EMPAVELI. Last week, we were thrilled to announce the FDA approval of SYFOVRE as the first and only treatment approved for patients living with GA, and we are now ready to launch in the U.S.," said Cedric Francois, co-founder and chief executive officer of Apellis. "With two commercial products, a robust pipeline of multiple late-stage programs, and a portfolio of pre-clinical assets heading towards the clinic, we believe we are in a strong position for 2023 and beyond."

H.C. Wainwright reiterates a Buy rating and price target of $58 per ADS for Belite Bio (BLTE) shares after the FDA approved Apellis Pharmaceuticals’ (APLS) SYFOVRE, or pegcetacoplan, for the treatment of geographic atrophy secondary to age-related macular degeneration. In the firm’s view, pegcetacoplan targets relatively late-stage GA patients, while Belite Bio’s Tinlarebant targets early-stage disease intervention. It is also noteworthy that Tinlarebant is a once-daily oral drug while pegcetacoplan is administered via intravitreal injection every month or every other month. H.C. Wainwright believes the market opportunity for Tinlarebant in dry AMD is not affected by the upcoming commercial launch of pegcetacoplan in March 2023.

BofA analyst raised the firm’s price target on Apellis to $115 from $79 and keeps a Buy rating on the shares after approval of Syfovre in GA came earlier than the PDUFA of February 26 and with a broad label for use in all patients with or without foveal involvement and with flexible once every 25 to 60 days dosing. These label inclusions "reflect our best-case scenario" and should differentiate Apellis near-term from competition, the analyst tells investors. The company priced the drug at $2,190 per vial and assumes that 90% of patients will be covered by Medicare, while the company expects a permanent J code around October 1, which in the firm’s view could impact sales for the first six months of launch, BofA added.

Citi raised the firm’s price target on Apellis Pharmaceuticals to $91 from $86 and keeps a Buy rating on the shares following the approval of Syfovre. The FDA letter reflects a broad label, supporting both foveal/extra-foveal and monthly/every-other-month regimens, the analyst tells investors in a research note. The firm says Apellis remains its top pick.

February 20 

Wells Fargo thinks shares of Apellis Pharmaceuticals (APLS) could be up 20% on Syfovre’s early approval. However, the news was largely priced in and the rally "might fade," the analyst tells investors in a research note. Wells remains cautious on the shares in the near term on potential for Iveric bio’s (ISEE) Zimura to also gain a broad geographic atrophy label and for a slow launch. It keeps an Equal Weight rating on Apellis with a $58 price target.

Iveric bio (ISEE) shares traded higher Friday after competitor Apellis (APLS) announced the approval of Syfovre in geographic atrophy, BofA analyst Greg Harrison the analyst tells investors in a research note. The FDA action date for the approval of Iveric’s Zimura in geographic atrophy is set for August 19, the firm points out. It believes the Syfovre approval gives Zimura "clearer path towards approval." BofA has a Buy rating on Iveric bio with a $31 price target.

February 17 

Tesla (TSLA) has been considering an acquisition of battery-metals miner Sigma Lithium (SGML), Bloomberg reports, citing people with knowledge of the matter. The car maker has been in talks with potential advisers about an offer, the report notes.

Apellis Pharmaceuticals announced that the U.S. Food and Drug Administration has approved SYFOVRE for the treatment of geographic atrophy secondary to age-related macular degeneration. SYFOVRE is the first and only FDA-approved treatment for GA, a leading cause of blindness that impacts more than one million people in the U.S. and five million people worldwide. "The approval of SYFOVRE is the most important event in retinal ophthalmology in more than a decade," said Eleonora Lad, M.D., Ph.D., lead investigator for the OAKS study, director of ophthalmology clinical research, associate professor of ophthalmology, Duke University Medical Center. "Until now, there have been no approved therapies to offer people living with GA as their vision relentlessly declined. With SYFOVRE, we finally have a safe and effective GA treatment for this devastating disease, with increasing effects over time."

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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