Marketbeat’s analyst tracking tools are a great way to hunt down potential investments or trades, as the case may be. Analyst activity has a profound impact on market dynamics so an uptrend or downtrend in their sentiment is a telling sign. Today’s list includes 3 of the most downgraded stocks, but these are names that investors should buy, not sell. Tesla and Microsoft have seen a reboot in their outlooks that has led to their downgrades while fear of slowing and competition have analysts shying away from SentinelOne.
In all 3 cases, there is ample evidence their respective industries are strong and, individually, amply reason to be attracted to the company and stock. Microsoft and Tesla are both innovative leaders in their fields; Microsoft at least is a blue chip tech, both are mega-cap tech, and Sentinel One is a hyper-growth story within cybersecurity.
Tesla Is The Most Downgraded Stock For Q1?
Tesla (NASDAQ: TSLA) is listed as Marketbeat.com’s most downgraded stock for February, but the worst that can be said of the data is that it was mixed and came with many price target reductions. There are 37 analysts with current ratings on the stock, and at least 31 of them came out in the last 90 days. The takeaway, however, is that sentiment is firming from a weak Hold to a firm Hold verging on Moderate Buy with a price target that is also moving higher. The consensus price target is up compared to last month and last quarter and is helping the stock to put in a bottom. The consensus assumes a 13% upside from the $195 level where support appears strong.
The TSLA chart is not without its negatives, but the near-term action is promising. The stock returned to the $180 level, tested support, and support was confirmed with a rebound. The market is now tracing a tight Head & Shoulders/Vee-Bottom that will be confirmed when price action moves above $215 toward the analysts' average target. Tesla next reports in mid-April when it is expected to report YOY growth but a sequential downtick in business.
Microsoft, Downgraded To Moderate Buy
Microsoft (NASDAQ: MSFT) is another downgraded name to take with a grain of salt. The downgrades have it 4th position regarding the pace of activity but this is to Moderate Buy from Strong Buy. Marketbeat.com is tracking 32 analysts with current reports, 19 of which came out over the last quarter, and the worst that can be said is it received 1 downgrade to sell which is an outlier. All other ratings are at least a Hold and the consensus price target, which is about 10% above recent action, is trending higher after hitting bottom late in 2022.
Microsoft isn’t a value trading at 27X its earnings, which is consistent for blue chip tech like this. Apple (NASDAQ: AAPL) trades a handle or so lower but also pays a significantly lower dividend. Neither is large, Microsoft pays about 1.1% at these price levels, but it is an incredibly safe and growing payout investors can rely on.
SentinelOne, Down But Not Out
SentinelOne (NASDAQ: S) has been trending lower from the post-IPO peak on fear of slowing growth compounded by fear of slowing in the cybersecurity industry. Names from Zscaler (NASDAQ: ZS) to Palo Alto Networks (NASDAQ: PANW) have been under pressure for the same reasons, and they’ve all reported OK if not good results and outlook. This has the group bottoming, and SentinelOne should be included despite the recent trend in analyst sentiment.
The analysts; Marketbeat is tracking 26 analysts with ratings on SentinelOne, 19 of which are less than 90 days old, and it is ranked 5th most downgraded stock. Like Microsoft, this is a downgrade to Moderate Buy from a more solid Buy rating in 2022. The takeaway is that the price target has been trending lower but appears to have bottomed or begun to bottom. SentinelOne reports results next week and may spur the analysts to act in support of that bottom should results echo news from peers.