Analyst Downgrades: Wells Fargo & Co, Skechers USA Inc, and Childrens Place Inc

Analysts downwardly revised their ratings and price targets on Wells Fargo & Co (NYSE:WFC), Skechers USA Inc (NYSE:SKX), and Childrens Place Inc (NASDAQ:PLCE)

by Karee Venema

Published on Sep 21, 2016 at 9:51 AM

Analysts are weighing in on bank stock Wells Fargo & Co (NYSE:WFC), shoe designer Skechers USA Inc (NYSE:SKX), and specialty retailer Childrens Place Inc (NASDAQ:PLCE). Here's a quick roundup of today's bearish brokerage notes on WFC, SKX, and PLCE.

  • J.P. Morgan Securities downgraded WFC to "neutral" from "overweight" and lowered its price target to $48 from $53.50, citing increased legal costs, declining revenue, and reputation risk in the wake of the bank's phony account scandal. This comes one day after Morgan Stanley upgraded the stock -- saying its recent sell-off created a value opportunity -- in the wake of Wells Fargo & Co CEO John Stumpf's dramatic testimony on Capitol Hill. There's plenty of room for more analysts to re-evaluate their upbeat ratings, too, should WFC extend its recent slide. Although the security is down almost 9% month-to-date at $46.31, the majority of covering brokerage firms maintain a "buy" or better rating. A fresh round of downgrades could pressure WFC even lower.
  • SKX saw its rating cut to "equal weight" from "overweight" and its price target slashed to $25 from $41 at Morgan Stanley. The brokerage firm said the shift toward more fashionable shoes from athletic designs will likely weigh on sales in the near term. Against this backdrop, the shares of SKX have dropped 7.4% to trade at $21.50, and hit a new annual low of $21.41 out of the gate. This negative price action is nothing new, considering Skechers USA Inc has surrendered 54% year-over-year -- most recently taking a steep earnings-induced slide in late July. Short-term options traders are more put-skewed than usual, too, per SKX's Schaeffer's put/call open interest ratio (SOIR) of 1.13 -- in the 71st annual percentile.
  • PLCE was downgraded to "neutral" from "overweight" at Piper Jaffray -- which also lowered its price target to $88 from $99 -- on valuation concerns. While the stock is down 4.3% at $79.27 this morning, it has put in a solid performance over the long term. Specifically, PLCE has added more than 46% in 2016, and notched a record high of $90 on Aug. 17. Plus, today's decline could find a foothold atop Childrens Place Inc's 80-day moving average -- a rising trendline that contained a pullback earlier this month. Short sellers are likely hoping for an extended drop, though. Although short interest fell nearly 12% in the most recent reporting period, it still accounts for a lofty 18.3% of PLCE's available float, or 5.5 times the average pace of trading.
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