The stock market has been falling for several weeks, but nothing like what was seen last week. The carnage of tariffs immediately turning into a trade war with much higher recession risks has sent investors reeling. Even Wall Street analysts and strategists have been feeling the pinch on their favorite stocks and sectors.
Oggonomics has tracked many analyst reports and strategist reports pointing out how bad the tariffs will impact companies, sectors and even the economy. And with risks of a trade war sending the U.S. into a recession looking even stronger, it is of little surprise that Wells Fargo and RBC Capital Markets have joined the likes of Goldman Sachs and others in cutting their S&P 500 price targets as a result.
Some stocks have sold off which maybe should not have sold off. Others still face much harsher environments ahead, particularly if back-and-forth tariff hikes take hold as President Trump is set to play hardball with any and every nation that doesn’t give the U.S. a larger piece of the trade pie.
There are many sectors at risk from tariffs, trade war and recession. But we are seeing more specific research reports pointing to these items specifically along with how the factors will impact specific stocks. Some of the calls are admittedly going to feel late to the party after last week’s market panic. But other calls are actually defending and in some cases recommending to buy after the panic set in.
Oggonomics would remind its readers that no single analyst report should ever be the sole basis for buying or selling a stock. Sometimes analysts are just wrong, and sometimes the underlying fundamentals can change in a moment.
Here are specific analyst calls on targeted companies and targeted sectors that point directly to tariff, trade war and increased exposure due to rising recession risks.
THE MOST VOCAL & OBVIOUS TARIFF LOSERS
Dan Ives of Wedbush Securities has been vocal against crushing blow from tariffs, even noting that the effort could set the U.S. back 10 years in the technology and AI race. He maintained his Outperform rating on Apple Inc. (NASDAQ: AAPL) but slashed his price target to $250 from $325 as Apple faces extreme manufacturing geography issues in its tariffs. Ives also maintained its Outperform rating on Tesla Inc. (NASDAQ: TSLA) as a long-term bull, but he slashed his target to $315 from $550 in the call. In a combination call, Ives touted that Apple and Tesla have the largest damage from the trade war. He even called out Musk being in a “brand crisis tornado.”
CRYPTO-WINTER ALL OVER AGAIN?
The crypto sell-off and market weakness are hurting the two public trading leaders after a weekend selling spree saw well over $1 billion in exits from crypto. A recession is also likely to limit cash-strapped investors trading if they are suddenly paying higher prices for goods. Barclays maintained an Overweight rating Robinhood Markets, Inc. (NASDAQ: HOOD) but slashed its price target down to $45 from $76. Coinbase Global, Inc. (NASDAQ: COIN) was viewed even more harshly, as Barclays maintained its Equal-Weight rating while slashing its price target to $169 from $328 in the call. Barclays trimmed other financial price targets as well, but these two crypto to active trader platforms were given the biggest haircuts.
Sadly, this weekend’s drop in Bitcoin and crypto was right after Bitcoin was proving itself as a standalone asset class. In times of panic and margin calls, anything that can be accessed as a source of funds will be used as a source of funds — even crypto, gold, silver… and even closed-end funds that have no ties to stocks in their holdings.
BIG BANKS & INVESTMENT BANKS HIT
Morgan Stanley is reducing its exposure to top banks. The investment banking firm is now bullish on Bank of America Corporation (NYSE: BAC) with an upgrade to Overweight from Equal-Weight at just 8-times earnings, even if the price target was trimmed down to $47 from $56 in the call. Morgan Stanley is now downgrading Goldman Sachs Group Inc. (NYSE: GS) to Equal-Weight from Overweight as it is deemed to be the most exposed large-cap bank to investment banking revenue that would be hurt in a recession or deteriorating market conditions. Northern Trust (NASDAQ: NTRS) was also downgraded to Underweight from Equal-Weight as the market pullback will make it less likely that Northern Trust will progress toward a 105% to 110% expense-to-trust fee ratio target.
AIRLINES TO SUFFER
UBS has downgraded airlines to Neutral from Buy because recessions are bad for air carriers. The firm believes that strong international demand and premium segments will fade under tariffs with declining demand. Alaska Air (NYSE: ALK), Delta Air Lines (NYSE: DAL) and United (NYSE: UAL) were all downgraded to Neutral from Buy as available seat miles suffered 10% to 11% in the recessions of 2001 and 2009. United’s target was cut to $59 from $107 and Delta’s target was cut to $42 from $77. The firm also expects airlines to withdraw their prior guidance with weaker corporate travel and weaker leisure travel demand.
ALSO READ: 20 STOCKS IMMUNE TO TARIFFS (MAYBE)?
GM TAKING A BIG HIT!
General Motors Company (NYSE: GM) was downgraded to Sell from Hold and its price target was slashed to $35 from $50 at Bernstein, with the firm pointing specifically to tariffs. The firm admits it waited for clarity on policy but now sees import tariffs of 25% now in effect and tariffs on car parts coming in a few weeks. The analyst even warned that GM may have to pause its share buybacks to conserve cash as about 45% of its cars sold in the U.S. are actually imported — slashing earnings by more than half ahead.
BIG MACHINERY FOR THE GLOBE, OR NOT
Terex Corporation (NYSE: TEX) manufactures materials processing machinery, waste and recycling solutions, mobile elevating work platforms, and equipment for the electric utility industry. It manufactures its products in North America, Europe, and Asia Pacific and sells those products worldwide. Needless to say, it is likely to see a tariff hit coming in and also on a reciprocating basis if other nations tack on more tariffs like China did.
Terex was downgraded to Sell from Neutral and its price target was slashed down to $32 from $49 in the call.
Other big industrial leaders with overseas sales and manufacturing exposure have taken it on the chin as well.
REGIONAL BANK VALUATIONS CHEAP
Robert W. Baird raised its ratings and targets for several regional and super-regional banks. While these banks have recession exposure and while their customers may face pressure from a recession risks and/or tariffs, the valuations have come down substantially in the sell-off over the last week (and six weeks). Three key upgrades were seen:
- KeyCorp (NYSE: KEY) was raised to Outperform from Neutral with a $18 price target.
- Fifth Third Bancorp (NASDAQ: FITB) raised to Outperform from Neutral with a $47 price target.
- First Horizon (NYSE: FHN) was raised to Outperform from Neutral with a $22 price target.
WEAK APPAREL PRICING POWER PLAYERS
VF Corp (NYSE: VFC), with extensive overseas manufacturing in clothing and still in the midst of a turnaround recovery, was downgraded to Neutral from Buy and its price target was slashed down to $12 from $30 by Citi. Citi also slashed earnings estimates due to tariffs for clothing and shoe companies like Columbia Sportswear (COLM), Levi Strauss (LEVI), Ralph Lauren (RL) and PVH (PVH) with a warning that tariffs will hit apparel companies hard. The firm also believes there is not sufficient pricing power to offset the higher costs — and those who do try to raise prices to offset the costs will face weaker demand.
DOLLAR STORE DISCOUNTS
It is possible that discount stores may get a reprieve. While tariffs are shown to be universal, carveout items for goods too cheap to make here may get a break. And discounters may win as customers are strapped for cash with more expensive items elsewhere. Dollar Tree (NASDAQ: DLTR) was raised to Buy from Neutral and its target was hiked up to $103 from $76 at Citi. The firm also raised Dollar General Corp. (NYSE: DG) to Neutral from Sell, but while that is still more cautious even its price target was raised to $101 from $69. Dollar General’s mix of items should only be about 10% tied to tariffs as it mostly sells food and consumables and should be resilient if the consumer weakens further.
