This analysis by JPMorgan suggests that these stocks may be overvalued and poised for a potential downward trajectory. Thus, if you own or are thinking of buying any of these shares, you may want to consider doing more due diligence. With that information, here are three JPMorgan price target cuts.
Meta Platforms (META)
Wall Street’s love of generative artificial intelligence (AI) has put increased focus on Meta Platforms (NASDAQ:META), the first of our JPMorgan price target stocks. Since reporting earnings on Apr. 24, Meta shares have come under pressure and are now trading at multi-month lows. The light revenue forecast, increased spending, and concerns about profitability were among the factors that contributed to the plunge in Meta’s shares and average price target cuts by analysts.
Yet, this reaction overshadowed the company’s positive first-quarter 2024 results, which surpassed analyst expectations. Meta reported a 27% year-over-year (YOY) increase in revenue, reaching $36.46 billion. This increase marks the company’s fastest quarterly revenue growth rate since 2021. Net income also doubled YOY, rising to $12.37 billion or $4.71 per share.
However, investor sentiment focused on Meta’s conservative revenue forecast for the upcoming quarter. Management projected sales for the second quarter on average of $37.75 billion, falling short of analyst estimates of $38.3 billion. Additionally, concerns about Meta’s increased spending on non-profitable areas such as AI and mixed reality, contributed to the decline in shares.
Despite the recent sharp fall in shares, META stock has enjoyed a strong year-to-date rally of over 20%. Meanwhile Meta’s valuation appears stretched at over 32 times forward earnings and 8 times sales. Yet, Wall Street history shows us that that price declines in mega-caps like Meta Platforms do not typically last for long. Interested investors should do more diligence and keep an eye on the $400 level for potentially buying the dips in META shares.
Prologis (PLD)
We continue our discussion of companies about JP Morgan price target cuts with Prologis (NYSE:PLD), a real estate investment trust (“REIT”). Management focuses on strategically located logistic facilities, such as warehouses, near major transportation hubs like seaports, airports, and highways. This proximity allows businesses to efficiently receive, store, and distribute goods.
The REIT reported mixed financial results for the first quarter of 2024 in April. Net earnings per diluted share were 63 cents for the first quarter of 2024 compared with 50 cents for the first quarter of 2023. Core funds from operations (FFO) per diluted share was $1.28 for the quarter, compared with $1.22 for the same period in 2023.
Investors raised eyebrows as the logistics warehouse operator adjusted its 2024 guidance downward. This move reflects a potential moderation in the previously robust warehousing demand. Management acknowledged several factors contributing to this shift, including rising interest rates, a more cautious retail environment, and geopolitical uncertainties. Prologis also noted that these factors are prompting companies to adopt a more conservative approach to leasing decisions.
As a result, Prologis stock fell and is now hovering slightly above the 52-week low of $96.64 last seen on October 2023. Despite a 22% year-to-date decline, PLD stock still remains overvalued at around 45x forward earnings and 12x sales. While the shares yield an attractive 3.7% dividend, long-term investors may still want to wait before hitting the “buy” button on Prologis.
Silicon Laboratories (SLAB)
The final pick among JPMorgan price target cuts is the fabless semiconductor business Silicon Laboratories (NASDAQ:SLAB). The company is known for silicon-based devices, software, and related intellectual property used in a wide range of electronic products. Silicon Laboratories focuses on mixed-signal and analog-intensive integrated circuits, catering primarily to the Internet of Things (IoT) market. SLAB provides wireless microcontrollers, sensors, and software development tools for connected devices used in smart homes, industrial automation, and other IoT applications.
The semiconductor company reported financial results for the first quarter of 2024 that fell short of expectations. Revenue declined 57% YOY to $106.4 million. Net loss came in at $56.5 million, a sharp reversal from a net profit of $14.0 million in the same period last year. This translated to a loss per share of $1.77, compared to earnings per share of 44 cents in the prior-year period.
Adding to investor concerns, management’s guidance for the second quarter was cautious. The company anticipates a diluted loss per share ranging from $1.45 to $1.61. This bleak outlook, coupled with the stock’s already stretched valuation with a price-to-sales (P/S) ratio of 6.1, prompted a price target cut by JPMorgan. SLAB shares have declined 7% YTD but increased volatility on Wall Street may lead to further downward pressure.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.