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Cisco sales poised to falter; Newell devoid of catalysts: 5 big analyst cuts

Investing.com — Here is your Pro Recap of the biggest analyst cuts you may have missed today: downgrades at Cisco, Newell, Datadog, CubeSmart , and Olin.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Cisco downgraded at Raymond James

Raymond James downgraded Cisco Systems (NASDAQ:CSCO) to Market Perform from Outperform, anticipating the company to suffer college-campus sales declines, which the analysts believe will likely account for around one-third of the expected top-line decline in 2024.

The analysts also wrote that the company's pending $28 billion acquisition of Splunk (NASDAQ:SPLK) looks strategically sound, as it complements XDR, but that it limits Cisco's options and lacks differentiation in the face of mounting competitive pressures.

Despite these challenges, the analysts argue that the share valuation remains attractive, with a forward P/E ratio lower than that of the S&P 500 and EV/EBITDA ratio below the five-year median.

They also wrote that preliminary checks suggest the October quarter will meet expectations, although they added that there is some risk to the outlook, writing:

"We expect Cisco does well in its October quarter. Cisco’s backlog has come down. We imagine Cisco could forecast a worse than seasonal sales decline in its January quarter while customers absorb prior purchases and the macro remains weak."

Shares were ticking down fractionally to $51.35 in premarket trading.

Newell Brands gets at least a couple of downgrades

JPMorgan and Truist both downgraded Newell Brands (NASDAQ:NWL) Monday morning, as reported in real time on InvestingPro.

The consumer-goods purveyor - whose portfolio includes Rubbermaid, Sharpie, and Graco (NYSE:GGG) - slashed its full-year sales outlook on Friday, prompting JPMorgan to lower the stock to Neutral from Overweight and a far lower new price target of $7.00 (from the prior $11.00).

Q3 earnings, the analysts said, were "disappointing again," adding ,“After three consecutive guidance cuts mostly due to weaker category demand which will likely linger for longer (12-18 months), we believe it is prudent to move to the sidelines."

Truist also moved to a neutral stance on the stock, downgrading it to Hold from Buy with an $8.00 price target.

“Simply put, the post-pandemic category volatility (at home categories which were inflated during the pandemic, slowly deflating) has plagued numerous consumer goods companies in 2023,” the analysts wrote in a note.

“We see no catalysts on the horizon from which to recommend the name,” they added.

The company last week said it recorded Q3 EPS of $2.32 and revenues of $3B, both above the consensus estimates, but shares dropped nearly 10% on Friday as investors reacted to the company’s announced restructuring program. Year to date, shares are down nearly 50%.

Three more downgrades

Baird downgraded Datadog (NASDAQ:DDOG) to Neutral from Outperform and cut its price target to $84.00 from $100.00, noting increasing concerns about 2024 growth.

"While still multiple long-term positives, our industry conversations suggest optimization headwinds are likely to continue into next year. In addition, we believe consensus growth expectations for 2024 are too high,” commented the analysts.

BofA Securities downgraded CubeSmart (NYSE:CUBE) to Neutral from Buy and cut its price target to $38.00 from $51.00.

JPMorgan downgraded Olin (NYSE:OLN) to Neutral from Overweight and cut its price target to $48.00 from $75.00.

Senad Karaahmetovic contributed to this report.

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