The Drug Stock Downgraded on Amazon Risk

Cardinal Health is at increased risk of negative Amazon effect than its peers

Nov 20, 2017 at 9:57 AM
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Analysts are weighing in on Dow stock Wal-Mart Stores Inc (NYSE:WMT), beverage maker Monster Beverage Corporation (NASDAQ:MNST), and healthcare name Cardinal Health Inc (NYSE:CAH). Here's a quick roundup of today's bearish brokerage notes on shares of WMT, MNST, and CAH.

Overbought Wal-Mart Stock Gets Downgraded at Goldman Sachs

One day after hitting a record high following the retailer's blowout earnings report, Wal-Mart stock was downgraded to "neutral" from "buy" at Goldman Sachs, citing valuation concerns. And while the brokerage firm raised its price target to $100 from $91, this new level sits in line with Friday's notable milestone. Raymond James also raised its WMT stock price target, to $110 from $90.

Against this backdrop, WMT shares are down 1.1% this morning to trade at $96.44, but remain roughly 40% higher on a year-to-date basis. Given this strong price action, today's pullback may have been in the cards. Wal-Mart's 14-day Relative Strength Index (RSI) closed Friday at 74 -- indicating the stock was overbought.

Monster Beverage Stock Downgraded on 'Missplaced' Coca-Cola Hopes

Monster Beverage shares are down 3% to trade at $60.34, after Susquehanna downgraded the energy stock to "negative" from "neutral" and cut its price target to $51 from $56, citing "misplaced assumptions" about a possible buyout bid from Coca-Cola (KO). Credit Suisse, meanwhile, raised its price target to $69 from $62, waxing optimistic about international growth potential.

Heading into today's trading, MNST stock was up 40% year-to-date, and hit a record high of $62.80 last Tuesday, Nov. 14. Part of the recent upside has likely been due to a round of short covering. Short interest plunged 29.3% in the last two reporting periods to 4.89 million shares-- the fewest in five years.

Morgan Stanley Downgrades Cardinal Health

Cardinal Health stock is trading down 2.2% at $56.17, after Morgan Stanley cut its rating to "underweight" from "equal weight" and slashed its price target to $51 from $72 -- the lowest on Wall Street. The brokerage firm said the drug distributor's medical division puts it at more risk than its peers to negative exposure to Amazon's (AMZN) potential effort to ramp up its medical supply efforts.

Today's negative price action is just more of the same for the stock, which has shed roughly one-quarter of its value year-to-date, and hit a four-year low of $55.69 last Wednesday, Nov. 15. Short sellers continue to bet on bigger losses for CAH stock, too, with these bearish bets up 40.4% in the most recent reporting period. With bears firmly in control, continued pressure from shorts could send the shares to even lower lows.


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