3 Downgraded Stocks to Consider Selling

NASDAQ: ZG | Zillow Group Inc. Cl A News, Ratings, and Charts

ZG – The market has hit some choppy waters this past week. While the dip is likely to be bough, it’s a good time for investors to rebalance their portfolios. Patrick Ryan identifies three stocks that investors should consider selling.

Take a look at the latest POWR Ratings and you will find plenty of stocks have been downgraded to F and D grades, meaning Strong Sell and Sell, respectively. Though plenty of stocks were also upgraded in the latest POWR Ratings calculations, the fact that the list of downgrades is fairly length should make it clear we are not in a raging bull market.
 
If you own any of the stocks that have been downgraded in the POWR Ratings, now is the time to consider scaling back your position. It might even make sense to fade the downgrades through a short or a put option.
 
Without further ado, let’s take a look at three of the latest POWR Ratings downgrades: Utz Brands (UTZ), Chicken Soup for the Soul Entertainment (CSSE), and Zillow Group (Z).
 
Utz Brands (UTZ)

UTZ makes some delicious salty snacks yet investor optimism for this recent IPO is clearly fading. People have had their fill of fattening snacks during the pandemic. The collective focus is now shifting toward healthy food to eliminate the pounds packed on during the coronavirus and live a healthier, more active life following a lengthy quarantine. This phenomenon is bad news for UTZ. The analysts have established an average price target of $21.86 for the stock, meaning it has a -14% downside.

UTZ’s forward P/E ratio of 41.33 is fairly high for a snack maker. The stock has a D grade in the Quality, Value, and Sentiment components of the POWR Ratings. If you are curious as to how UTZ fares in the remainder of the POWR Ratings components such as Momentum and Growth, click here. Making matters worse is the fact that UTZ is ranked 80th out of 82 stocks in the Food Makers category. If you would like to learn more about this industry, you can do so by clicking here.

Chicken Soup for the Soul Entertainment (CSSE)

Entertainment companies that rely on ad spending have struggled during the pandemic. Businesses are hesitant to advertise during the economic contraction and ongoing pandemic largely because consumer spending is down and most companies don’t have the same marketing budget as was available before the economic decline. This is a large part of the problem with CSSE. CSSE makes video content for consumers across the globe. This content is presented on TV and also online.

CSSE has D grades in the Quality, Value, and Growth components of the POWR Ratings. If you are curious as to how CSSE fares in the remainder of the POWR Ratings, you can find out by clicking here. Of the 18 publicly traded stocks in the Entertainment – Media Producers industry, CSSE is ranked 16th. You can learn more about the Media Producers industry by clicking here.

The half dozen analysts who have studied CSSE have established an average price target of $28 for the stock. This means CSSE has a 14% downside. There is no reason to buy CSSE until the company improves its entertainment lineup or proves it can attract more advertising dollars. It will likely take upwards of a year for ad spending to return to normal so investors would be wise to completely avoid CSSE or even consider shorting the stock.

Zillow Group (Z)

Z has been on a tear of late yet there is a good argument to be made it is overvalued. Home prices are nearing record highs in many American markets yet current homeowners will likely prove slower to put their property up for sale in the months ahead simply because finding a new property at a reasonable price will not prove easy.

Z has D grades in the Quality, Value, and Stability components of the POWR Ratings components. You can find out more about Z’s POWR Ratings components such as Momentum, Sentiment, and Growth by clicking here.

Of the 67 stocks in the Internet segment, Z is ranked 50th. If you would like to learn more about stocks in the Internet space, you can do so by clicking here. Though there is a chance the red hot housing market will help Z reach even greater heights in the days and weeks ahead, the blazing hot industry cannot continue forever. Z is due for a pullback.

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ZG shares were trading at $195.96 per share on Friday morning, up $8.81 (+4.71%). Year-to-date, ZG has gained 44.15%, versus a 4.87% rise in the benchmark S&P 500 index during the same period.


About the Author: Patrick Ryan


Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...


More Resources for the Stocks in this Article

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