Wall Street Cools on These 2 Stocks

Meanwhile, Heico just got cut to "underperform" by Bofa-Merrill Lynch

Deputy Editor
Jul 11, 2019 at 3:16 PM
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Werner Enterprises Inc (NASDAQ:WERN) and Heico Corporation (NYSE:HEI) are on Wall Street's watch list after analysts slammed the two stocks with bear notes. The former got a drubbing from Credit Suisse, which downgraded the stock to "underperform" from "neutral," and cut its target price to $29 from $32.93, while the latter suffered a downgrade to "underperform" from BofA-Merrill Lynch. Below, we'll take a look at what's swaying these analysts' decision, as well as other factors that might determine both stocks' direction later down the line. 

Werner Enterprises is down 0.9% at $29.56, pacing for its third day in the red today, with Credit Suisse's bruising bear note following closely behind a price-target cut from J.P. Morgan Securities, issued earlier this week. Despite these recent analyst attacks, the consensus 12-month target price of $36.06 is at a fairly large 22.2% premium to current levels. Even more downgrades could put additional headwinds on the charts, too, with six of the 14 in coverage still sitting firmly in the "buy" or better camp. 

Looking at WERN's recent behavior, it's unsurprising that members of the brokerage bunch are choosing to exercise caution. While the security has made an effort to rally off its late-December lows, it's had some difficulty surmounting overhead pressure from its 320-day moving average. Plus, the equity is trading back beneath its 50-day moving average -- a former area of support that WERN has been testing its footing atop for months. 

Aerospace name Heico, on the other hand, just hit an all-time high yesterday, clocking in at $138.79. The stock is now down 0.7% at $135.38 on BofA Merrill-Lynch's comment that the security is trading at an "unprecedented" valuation. The analyst also warned traders against investing too heavily in the aerospace sector as a whole, too, given this year's unimpressive air traffic growth. 

A pullback might be inevitable for HEI, regardless, especially considering the equity's 14-day Relative Strength Index (RSI) of 73 -- in "overbought" territory. This suggests a short-term breather may be in the cards. 

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