The Analyst Anxiety Index: 3 Stocks to Avoid as Uncertainty Grows

Stocks to sell

Global stocks are surging. The MSCI ACWI Index, which encompasses both developed and emerging markets, reached another all-time high, continuing its record-breaking streak. This milestone is part of a broader trend in global equity markets, with 14 out of the world’s 20 largest stock exchanges recently setting new records. In contrast to this general market uplift, stocks with analyst uncertainty remain a notable exception, where divergent views among experts signal potential volatility and risk for investors.

In the United States, the S&P 500 and Nasdaq 100 indexes have also hit record levels, with the Dow Jones Industrial Average surpassing the 40,000 mark for the first time in history. This bullish momentum is mirrored across major markets in Europe, Canada, Brazil, India, Japan and Australia, where stock indices are either at or near their highest points.

Factors such as anticipated interest rate cuts, robust economies and strong corporate earnings propel the markets forward. Moreover, the presence of approximately $6 trillion in money market funds provides potential fuel for the rally to continue, with few apparent risks on the horizon.

The April downturn in global stocks was short-lived, as buyers quickly re-entered the market, contributing to the S&P 500’s longest stretch without a 2% decline since 2017-2018, lasting 311 days. Even Chinese equities, which have faced challenges since peaking in February 2021, show signs of recovery.

Investors hope the economy will remain robust while inflation decreases, leading to speculation that the Federal Reserve may relax monetary policy later in the year. As valuations increase, many analysts adjust their ratings to consider the latest stock prices. Along these lines, here are three stocks with analyst uncertainty to avoid, according to Wall Street analysts.

Bolt Biotherapeutics (BOLT)

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Bolt Biotherapeutics (NASDAQ:BOLT) shares experienced a series of downgrades from various analysts following the discontinuation of its lead program, BDC-1001 and significant changes in strategy and management. 

Leerink Partners shifted their rating from Outperform to Market Perform and adjusted the price target to $1.00 from the previous $3.00. The halt influenced the decision to develop BDC-1001, the company’s lead immune-stimulating antibody conjugate (ISAC) and the subsequent corporate restructuring, which includes a 50% reduction in the workforce.

Guggenheim also downgraded Bolt Biotherapeutics from Buy to Neutral, removing their price target entirely. The analyst cited low visibility on the success probabilities of the company’s remaining product candidates, BDC-3042 and BDC-4182, as a reason for the downgrade.

Stifel followed suit, lowering their rating from Buy to Hold and decreasing the price target to $1.50 from $6.00. Stifel’s analyst highlighted the challenges facing Bolt, including skepticism about the monotherapy efficacy prospects of BDC-3042 and the competitive landscape for BDC-4182, an ISAC targeting claudin-18.2, which is expected to enter clinical trials in FY25. 

Concerns were also raised about the potential safety profile of the next-generation platform, given the issues with toxicity in previous programs. 

Under Armour (UAA)

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Under Armour (NYSE:UAA) stock was downgraded at two sell-side brokers last week. JPMorgan (NYSE:JPM) shifted from a ‘Neutral’ to an ‘Underweight’ rating, with a revised price target set to $6.00, a decrease from the previous $8.00 target. In a separate move, William Blair downgraded Under Armor from ‘Outperform’ to ‘Market Perform.’

The downgrade move reflects the company’s forecast for fiscal year 2025, which includes an adjusted earnings per share (EPS) significantly lower than current market expectations, alongside anticipated revenue declines and margin pressures.

The analyst moves come after Under Armour management offered a weaker-than-expected outlook. On the top line, UAA sees revenue decline in the negative low-double-digits, which is less optimistic than the Street’s forecast of a 2.4% year-over-year increase. 

For the near-term outlook, Under Armour guided a diluted loss per share of -$0.08 to -$0.10 for the first quarter of 2025, in contrast to the Street’s anticipated $0.04 EPS. This guidance is based on expected revenues to be down in the low-teens year-over-year, which is below the Street’s estimate of a 0.1% decline and a predicted gross margin decrease of 20-30 basis points year-over-year, contrary to the Street’s expectation of a 70 basis points increase.

Baidu (BIDU)

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Morgan Stanley (NYSE:MS) lowered its stance on Baidu (NASDAQ:BIDU), downgrading the stock from Overweight to Equal-weight and lowering the price target to $125 from the previous $140. Baidu, known for its dominant internet search engine in China, has expanded its business into cloud services and artificial intelligence. The shift in analyst ratings contributes to the volatility and places Baidu among the stocks with analyst uncertainty.

The broker highlighted a modest year-over-year increase in Baidu’s core revenue for the second quarter but also pointed to a weak advertising outlook. Even though the company’s cloud growth is expected to pick up pace, the analyst noted that the monetization of Baidu’s artificial intelligence technology is still in the early stages. 

Despite a 17% rally in Baidu’s stock price, Morgan Stanley sees limited near-term catalysts for further growth. Analysts also noted that while iQIYI, a subsidiary of Baidu, is experiencing cyclical weakness, it is expected to achieve sustainable long-term growth.

Macquarie analyst Ellie Jiang also downgraded Baidu’s stock from Outperform to Neutral in a separate move. This additional downgrade by another brokerage firm reflects a broader consensus among analysts regarding Baidu’s current market position and future prospects.

On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Shane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.

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