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Time to Sell These Downgraded Stocks?

The stock market faced a brutal sell-off last week on concerns over the increasing odds of a recession because of the aggressive tightening of monetary policy. The Fed raised interest rates by 75 basis points and expects a further 50 or 75 basis points increase in its July meeting. Amid the uncertainties surrounding the market, downgraded stocks Cano Health (CANO), indie Semiconductor (INDI), and Oak Street Health (OSH) might be best avoided. Keep reading.

Although the stock market bounced on Friday, the week ended in the red. The S&P 500 closed the week down 5.8%, the Dow Jones Industrial Average slipped under the 30,000 mark, down 4.8% for the week, and the Nasdaq Composite lost 4.8%. The weekly performance of the major stock market indices is raising concerns.

The poor performance can be primarily attributed to the Fed’s recent interest rate hike. The central bank raised interest rates by 75 basis points, ending weeks of speculation. This marks the most aggressive rate hike since 1994.

Fed chair Jerome Powell added that he sees a 50 or 75 basis-point increase in its July meeting. The policy tightening is coming at a time when economic growth is slowing down, and prices are soaring.

Since the stock market is expected to remain under pressure in the near term, downgraded stocks Cano Health, Inc. (CANO), indie Semiconductor, Inc. (INDI), and Oak Street Health, Inc. (OSH) might be best avoided.

CANO was downgraded from ‘Buy’ to ‘Neutral,’ and OSH was downgraded from ‘Buy’ to ‘Underperform’ by Bank of America Corp. (BAC) analysts. INDI was downgraded by B.Riley Financial, Inc. (RILY) from a ‘Buy’ to a ‘Neutral’ rating.

Cano Health, Inc. (CANO)

CANO operates as a primary care medical services provider in the United States and Puerto Rico. The company owns and operates medical centers enabled by CanoPanorama, a health management technology-powered platform.

On April 14, employer-based dental care company Onsite Dental announced its strategic partnership with CANO for preventative dentistry and medical care. However, the gains from the collaboration might be stretched over a long period.

For the fiscal first quarter ended March 31, CANO’s loss from operations increased 139.9% year-over-year to $11.46 million. Net cash used in operating activities rose 153.3% from the prior-year quarter to $37.20 million. Net cash used in investing activities increased 38.7% from the same period the prior year to $13.46 million.

The consensus EPS estimate of a negative $0.06 for the quarter ending June 2022 indicates a 700% year-over-year decrease.

The stock has declined 63.5% over the past year and 45.6% year-to-date to close Friday’s trading session at $4.85.

CANO’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

CANO has a Stability and Sentiment grade of F and a Growth, Momentum, and Quality grade of D. In the 13-stock Medical – Hospitals industry, it is ranked last. Click here to see the additional POWR Ratings for CANO (Value).

indie Semiconductor, Inc. (INDI)

INDI operates as an automotive semiconductors and software solutions provider for advanced driver assistance systems. The company’s offerings include devices for automotive applications and photonic components on various technology platforms.

INDI’s total operating expenses increased 247.3% year-over-year to $56.33 million in the fiscal first quarter ended March 31. Non-GAAP operating loss and non-GAAP net loss came in at $16.47 million and $16.49 million, up 117.3% and 103.8% from the prior-year period.

Analysts expect INDI’s EPS to decline 33.3% from the same period the prior year to a negative $0.12 for the fiscal quarter ending September 2022.

Over the past year, the stock has declined 27.3% and 45% year-to-date to close Friday’s trading session at $6.60.

It’s no surprise that INDI has an overall F rating, which translates to Strong Sell in our POWR Rating system. The stock has an F grade for Value and Quality and a D grade for Growth, Stability, and Sentiment.

INDI is ranked last in the 96-stock Semiconductor & Wireless Chip industry. To see the additional POWR Rating for Momentum for INDI, click here.

Oak Street Health, Inc. (OSH)

OSH provides healthcare services to patients in the United States. The company operates primary care services for Medicare beneficiaries. It operates centers in several states, including Illinois, Michigan, Pennsylvania, Ohio, and Texas.

On June 7, OSH announced its plans to open centers in Colorado. Although the company’s footprint expansion is expected to be beneficial, there might be some time before substantial gains can be realized from this expansion.

For the fiscal first quarter ended March 31, OSH’s net loss attributable to OSH increased 52.2% year-over-year to $96.50 million. Net loss per common share stood at $0.43, up 48.3% from the prior-year period. Adjusted EBITDA declined 143.7% from the prior-year quarter to a negative $42.40 million.

Street EPS estimate for the quarter ending September 2022 of a negative $0.51 reflects a decline of 4.1% from the prior-year period. Likewise, Street EPS estimate for the fiscal year 2022 of a negative $1.99 indicates an 8.2% year-over-year decrease.

OSH’s shares have declined 72.4% over the past year and 53.4% year-to-date to close Friday’s trading session at $15.45.

OSH has an overall F rating, equating to a Strong Sell in our proprietary rating system. The stock has a Sentiment grade of F and a Value, Momentum, Stability, and Quality grade of D. It is ranked #12 in the Medical – Hospitals industry.

In addition to the POWR Ratings grades we’ve stated above, one can see the OSH rating for Growth here.


CANO shares were trading at $4.85 per share on Monday afternoon, up $0.21 (+4.53%). Year-to-date, CANO has declined -45.57%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.



About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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