Sell these stocks now, proven algorithm says

Nation’s largest used car dealer, one of world’s leading sports brands 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.

• Manchester United (MANU) – company that owns what it calls "one of the most popular and successful sports teams in the world" and believes it is "one of the world’s leading sports and entertainment brands with a global community of 1.1 billion fans and followers"
• Sunrun (RUN) – a home solar, battery storage, and energy services company
• CarMax (KMX) – an automobile retailer that identifies itself as "the nation’s largest retailer of used autos" with more than 230 stores and more than 30,000 associates
• 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
• Melco Resorts & Entertainment (MLCO) – a developer, owner, and operator of integrated resort facilities in Asia and Europe
• NexGen Energy (NXE) – a corporation focused on the development of the Rook I uranium project located in Saskatchewan, Canada into production
• Royal Caribbean Group (RCL) – a cruise company with a global fleet of 64 ships that owns and operates its flagship brand as well as Celebrity Cruises and Silversea Cruises
• ACV Auctions (ACVA) – a provider of a digital marketplace for wholesale vehicle transactions and data services
• Guardant Health (GH) – a precision oncology company
• NuScale Power (SMR) – a developer of small modular reactor, or SMR, nuclear technology that markets the NuScale Power Module pressurized water reactor and VOYGR series power plants
• Rhythm Pharmaceuticals (RYTM) – a commercial-stage biopharmaceutical company focused on hyperphagia and severe obesity caused by rare melanocortin-4 receptor, or MC4R, pathway diseases
• Wayfair (W) – operator of its namesake e-commerce site and a family of brands that offer home goods and furnishings
• 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

Learn more about the POWR Ratings

Recent news on these stocks:

December 9

Deutsche Bank analyst Simon Davies downgraded Manchester United to Hold from Buy with a price target of $24, up from $16, after the company reported Q1 results that were better than expectations, but also suspended dividend payments to conserve cash as a result of a material step up in leverage. The dividend suspension points to "an increased likelihood" that the controlling Glazer family will agree to sell, said Davies, who sees a risk that "the family may have unrealistic value expectations."

Morgan Stanley analyst Praveen Choudhary prefers Melco Resorts & Entertainment the most among the Macau names for better valuation and positive catalysts in 2023, calling it the firm’s "Macau Top Pick." Choudhary has an Overweight rating and $13.50 price target on U.S.-listed Melco Resorts shares.

NuScale Power announced that Karin Feldman will assume the role of interim Chief Operating Officer/Chief Nuclear Officer effective January 6, 2023. Current COO/CNO, Dale Atkinson, will retire on January 5, 2023, after more than eight years with NuScale. Feldman joined NuScale in 2012, presently serves as Vice President, Program Management Office, and is responsible for establishing and maintaining project management, project controls, cost estimating, and risk management standards. NuScale is conducting a national search to identify the next COO/CNO, the company said.

December 8

Manchester United reports Q2 adjusted EBITDA GBP 23.6M , Q2 total revenue GBP 143.7M. For FY23, the company is raising its guidance and expects total revenues to be within a range of GBP 590 million to GBP 610 million, driven by strong Matchday revenues, and adjusted EBITDA to be within a range of GBP 125 million to GBP 140 million, as a result of reduced player wage costs. Quarterly results are impacted by the postponement of two Premier League games, which were due to be played in first quarter and were delayed due to the Queen’s passing, as well as the timing of the 2022 FIFA Men’s World Cup, the company stated.

Guardant Health, Inc. (GH) announced it has entered into a collaboration with AstraZeneca (AZN) to pursue the development, regulatory approval and commercialization of the Guardant360 CDx blood test as a companion diagnostic to identify patients with ESR1-mutated metastatic breast cancer. The initiative is part of a larger strategic collaboration investigating the use of liquid biopsy as a tool to inform early therapy intervention.

Paysafe Limited announced that its Board of Directors has approved a consolidation and redesignation of the issued and unissued common shares, and the unissued undesignated shares, at a ratio of 1-for-12, such that after giving effect to the reverse stock split, the authorized share capital of the company shall be comprised of $22,000,000 divided into 1,600,000,000 common shares of par value $0.012 each and 233,333,333.3 undesignated shares of par value $0.012 each. The reverse stock split will be effective at 4:01 p.m. ET on December 12 and the common shares will begin trading on a split-adjusted basis when the New York Stock Exchange opens for trading on Tuesday, December 13.

December 6

JPMorgan analyst Daniel Adam double downgraded Royal Caribbean (RCL) to Underweight from Overweight with a price target of $47, down from $106, after assuming coverage of the name. Despite roughly $10B of capital raises so far this year and free cash flow generation that should cover most, but not all, of its future commitments, Royal could face a $400M funding shortfall by the end of next year, Adam tells investors in a research note. Additionally, in order to achieve its investment grade credit rating target by 2025, Royal likely needs to raise an additional $3.5B, via either equity or asset sales, says the analyst. He says that at current levels, a $3.5B equity deal would be 20% dilutive to shareholders. Adam prefers Norwegian Cruise Line (NCLH) to Royal Caribbean, as he sees near-term funding requirements for the former as "less onerous."

Deutsche Bank analyst Steve Powers downgraded Spectrum Brands to Hold from Buy with a price target of $70, up from $63. The analyst cites valuation for the downgrade. He sees Assa Abloy’s announced agreement last week to sell Emtek and the Smart Residential business in the U.S. and Canada to Fortune Brands as rebalancing Spectrum’s "risk/reward from here more neutrally." Powers also sees ore material downside if the Hardware and Home Improvement deal is further delayed or the Justice Department prevails in court.

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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