Buying the dip with S&P 500 and smaller stocks is a risky move to start with. And now, even normally bullish analysts are waving you off from trying it with some already-pummeled stocks.
Analysts warn eight stocks in the S&P 1500 already 9% or more from their highs in the past year, including meme stock favorite GameStop, financial World Acceptance and tech firm Xilinx, are due to tank another 10% or much more in the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Such caution is highly unusual coming from Wall Street analysts. And it's worth at least noting as some investors might feel the urge to try to scoop up stocks that look cheap.
"Investors may want to buckle up as it could be a rough ride for risk assets until inflationary data starts to abate, and I expect that it will, as we move through the year," said Brian Price, head of investment management at Commonwealth Financial Network.
Finding Negativity Is Unusual For S&P 500
Analysts tend to look to the bright side of most stocks in the S&P 500 as well as smaller ones. So seeing negativity crop up for stocks already in a correction is definitely unusual.
All told, analysts only think roughly 70 stocks in the S&P 1500, or less than 5% of the index, will fall in the next 12 months. In other words, analysts see upside for 95% of the stocks in the index. And of those expected to fall, a majority, wouldn't tempt many bargain hunters anyway. As they're only down less than 10% from their 52-week highs.
But that leaves keen investors with a handful of suffering stocks analysts are waving you off on.
Steer Clear Of Meme King
You might think most investors who poured into GameStop early last year would steer clear by now. Shares of the ailing videogame retailer are down more than 64% from the 52-week high notched on March 10, 2021. And just this year, the stock is off nearly 18% to 122.47.
But amazingly, meme investors say they are still alive and well despite the carnage. Nearly a third of Americans plan to keep investing in meme stocks like GameStop in the next 12 months, says Ally Invest. And more than half the investors who bought meme stocks last year plan to do it again this year. Additionally, 82% of the people who bought meme stocks in the last 12 months still own them.
Running to buy or own many meme stocks though, at least with GameStop, is a mistake, analysts say. Analysts think the S&P 1500 stock will fall another 72% in the next 12 months until hitting the target of 34 a share.
But the warnings go beyond just the popular memes. Analysts also think financial World Acceptance stands to drop another 42% to 210.05 a share. That's shocking as the stock is already down more than 20% from its 52-week high, putting it squarely in a bear market.
Warnings In The S&P 500, Too
A vast majority of analysts' warnings on damaged stocks are for smaller firms. But they're sounding alarms for some larger S&P 500 companies, too. But some might be a case of lag.
Take semiconductor firm Xilinx. You might think an opportunity to scoop up shares of an S&P 500 company for nearly 10% less than it was trading for in November 2021 is a screaming buy. And the stock is tempting investors, by rising 2.1% this year to 216.55 on takeover news. But analysts, though, still think the stock is due for a nearly 14% fall in the next 12 months to a target of 186.47. That estimate, though, looks out of date as AMD just got approval past skeptical regulators to buy the chipmaker for roughly $38 billion. Shares of Xilinx, though, already dropped more than 6% on Friday to 203.09.
Will some bargain hunting pay off? Sure, just as some value S&P 500 stocks already are. But analysts aren't making any mystery of the cheap stocks they think will get a whole lot cheaper.
More Pain Ahead?
S&P 1500 stocks down at least 9% from highs analysts think still have 10% or more to fall
| Company | Symbol | Index | Stock % drop from 52-week high | Further downside to analyst target* | Sector |
|---|---|---|---|---|---|
| GameStop | S&P 400 | -64.9% | -72.2% | Consumer Discretionary | |
| Neogen | S&P 400 | -26.5 | -27.6 | Health Care | |
| World Acceptance | S&P 600 | -21.0 | -41.6 | Financials | |
| Xerox | S&P 400 | -20.6 | -19.8 | Information Technology | |
| Gannett | S&P 600 | -14.2 | -14.0 | Communication Services | |
| Avista | S&P 600 | -12.3 | -10.2 | Utilities | |
| Xilinx | S&P 500 | -9.7 | -13.9 | Information Technology | |
| Marcus & Millichap | S&P 600 | -9.5 | -15.4 | Real Estate |
