Sifting through Marketbeat’s analyst tracking data, this time the most-downgraded stocks list, turned up three interesting names that qualify as must-have stocks for many investors. NVIDIA (NASDAQ: NVDA), Nike (NYSE: NKE), and Salesforce.com (NASDAQ: CRM) are all leaders in their spheres, exhibiting solid fundamentals, and getting downgraded because the outlook doesn’t match up to what the analysts were expecting. This is bad news for prices but only in a near-term sense because these must-have names still have strong analysts and institutional support and they have the support because of results. There are headwinds now but the fundamentals support a favorable outlook for long-term growth which makes today’s weakness tomorrow’s buying opportunity. The real takeaway is that all of these names are still expected to see at least 20% of upside, even after the revisions sparked by the Q2 results.
NVIDIA Market Overextends On Tepid Outlook
Shares of NVIDIA fell hard in the wake of the Q2 earnings report aided in no small part by the analysts. There have been at least 21 analyst reports out since the company reported its results and not one was bullish. Of them, only 3 did not include price target reductions but two of those were downgrades to Neutral and the other a newly initiated coverage. The takeaway from the activity, however, is that analysts still have this stock pegged at a Moderate Buy with a price target more than 50% above the current price level.
The company is expected to experience some weakness in the gaming end of the business in the back half of the year but there are two things mitigating this outlook. The first is that gaming weakness will pass like it always does and the other is data centers. In regard to gaming, CEO Jensen Huang says fundamentals are strong but the gaming industry is undergoing an inventory correction as OEMs get ready for the next generation of the company’s chips. The company’s data center business has grown to nearly 50% of the revenue and helping to support the business.
Nike Bottoms Ahead Of Earnings
Nike received a round of price target reductions in the wake of its Q2 results that surprisingly resulted in a bottom for the price action. Now, with the company on track to report Q3 results at the end of this month, the stock is in a position to gain 20% or more assuming the analyst are right. The consensus target is still a Moderate Buy, there was no change there, and the downtrend in the price target bottomed over the last 30 days so there is some optimism in the group. If the company can continue to execute on its inventory controls and DTC/eCommerce business it should be able to outpace the consensus for $12.3 billion in revenue. UBS analyst Jay Sole thinks the company’s turnaround (based on DTC/eCommerce) is at hand although some near-term headwinds remain, his price target for the stock is another 15% above the consensus.
Salesforce.com Falls On FX Headwind
Salesforce.com fell in the wake of its earnings report but it may also be bottoming. The company beat on the top and bottom lines and offered tepid guidance that was heavily impacted by FX conversion. The takeaway from the chatter, however, is that Salesforce.com remains undervalued at its current levels although less so than before. The Marketbeat.com consensus rating is holding steady at a Moderate Buy/Buy with a price target that, while down in the 90 and 30-day comparisons, suggests there is at least 50% of upside ahead for this market.