Wall Street experts have reputations to protect. Therefore, whenever analyst downgrades materialize, it could send impacted investors into a foul mood. However, it’s important to realize that everyone makes mistakes, even market professionals.
In other words, it’s not the end of the world when bearish opinions are broadcasted. In some cases, they may lay the groundwork for contrarian stocks to buy.
To be sure, I don’t want to make light of the matter. Analysts – especially those from top financial firms – influence other investors. When they’re bullish on certain opportunities, they tend to rise. Conversely, analyst downgrades also affect securities but in a less-than-favorable way.
What you must bring into the discussion, though, is context. If the underlying business is sound and even better, projected to be relevant in the future, any volatility could offer a discounted entry point. Yeah, it’s goofy to say but you can turn that frown upside down. Below are recent analyst downgrades that may actually be stocks to buy.
Spirit AeroSystems (SPR)
Based in Wichita, Kansas, Spirit AeroSystems (NYSE:SPR) is an aerostructure manufacturer. Spirit builds several important components of leading commercial jetliners. To be fair, SPR stock hasn’t been the best performer but it’s moving in the positive direction. In the past 52 weeks, it’s up over 7%. However, that wasn’t enough for Benchmark, which downgraded shares to a “hold.”
While that might not be the result investors were looking for, SPR still carries a consensus view of moderate buy. Further, the average price target comes in at $35.50, implying almost 12% upside potential. The most optimistic target calls for $40, which implies a return of over 26%. Fundamentally, travel prioritization in the post-pandemic cycle could provide indirect benefits for Spirit.
Another factor to consider is the overall recovery from Covid-19. That means business travel should return, particularly with a labor market that’s still growing. Covering experts believe that fiscal 2024 sales may hit $7.03 billion. If so, that would represent a 16.3% rise from last year.
Yes, SPR may be one of the analyst downgrades. However, the fundamentals and the data demonstrate that it’s one of the stocks to buy.
First Solar (FSLR)
Headquartered in Tempe, Arizona, First Solar (NASDAQ:FSLR) is a solar technology firm that provides photovoltaic (PV) solar energy solutions in the U.S. and other international markets. Fundamentally, the company enjoys a relevant narrative. With the political and ideological winds favoring zero emissions and sustainable energy infrastructure, solar certainly has its place. However, some experts are skeptical.
Chart wise, FSLR stock has been moving. Since the start of the year, it gained just over 51%. For the past five years, the company added a return of more than 313%. However, the latest hot jobs print may have clouded sentiment over interest rate reductions. Since high borrowing costs have represented a sector headwind, First Solar faces huge risks.
It’s not surprising that Janney Montgomery downgraded the solar tech firm. But let’s put the latest not-so-great news into context. Overall, FSLR enjoys a consensus view of moderate buy. And the most optimistic price target calls for $356. Broadly speaking, interest rates can decline, depending on economic conditions.
Lastly, covering experts anticipate that fiscal 2024 revenue may rise 36.2% to hit $4.52 billion. Until this narrative shifts, FSLR is one of the analyst downgrades that still ranks among the stocks to buy.
Union Pacific (UNP)
As a giant in the industrial sector, Union Pacific (NYSE:UNP) ranks among the railroad titans. Per its public profile, the company offers transportation services for various sectors, including grain, fertilizers, food products and coal and renewable energy commodities, among many others. It’s an obvious statement but UNP represents a vital cog in the economy. Generally, then, analysts are bullish on UNP stock.
That said, some cloudy weather has appeared on the horizon. Recently, Loop Capital Markets downgraded its assessment of UNP stock to a “hold.” That’s not the most encouraging rating considering the positive elements such as the aforementioned hot jobs report. It makes you raise your eyebrows a bit. However, let’s bring in the broader context. UNP still carries a consensus view of moderate buy.
Also, the average price target is robust at $265.35, implying almost 18% upside potential. Further, the high-side estimate lands at $290, projecting growth of nearly 29%. By the way, that optimistic view came earlier this month by Barclays.
Plus, you got to figure that policymakers may issue a more accommodative monetary framework if the economic picture weakens. Analysts are expecting steady expansion of the top and bottom lines. For now, UNP is one of the analyst downgrades that might not deserve it.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
