Widely known for its coverage of popular growth stocks like Tesla (NASDAQ:TSLA), much like the old E.F. Hutton slogan, when Wedbush Securities talks, people listen. As such, many in the market may take caution with the stocks with lowered price targets that the sell-side firm covers.
But much like how unthinkingly following sell-side ratings may not necessarily result in success in the market, you may not want to assume that a stock with a lowered price target is doomed to produce poor returns.
Instead, factors like lowered price targets are among many criteria to consider before making an investment decision.
With this in mind, let’s look at three stocks that have recently received lowered price targets from Wedbush.
AMC Entertainment (AMC)
Wedbush has maintained a “neutral” rating on AMC Entertainment (NYSE:AMC) since August 2023, when it raised its rating on the movie theater chain’s shares from “underperform.”
On May 9, however, the sell-side firm trimmed its price target on AMC stock from $4 to $3.50 per share. The trimming may slightly reduce, but this re-rating underscores Wedbush’s view on AMC’s underlying value. Arguably, one should take it as a sign to exercise caution following the recent wave of meme mania.
This speculative frenzy sent AMC from around $3 to as much as $11.88 per share this week. While the stock has since started crashing back down to prior price levels, more downside may lie ahead. Why? The market could bid AMC lower as it digests the company’s decision to raise more capital through the dilutive issuance and sale of new shares.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is another name on the list of stocks with lowered price targets from Wedbush. According to The Fly, right after the Facebook parent’s latest quarterly earnings release last month, Wedbush maintained its “outperform” rating on the stock but lowered its price target from $570 to $480 per share.
META stock has climbed back toward this revised price target following a post-earnings plunge. On one hand, Wedbush’s target makes sense. Shares currently trade for around 24.1 times earnings, on par with similar “Mag 7” stocks like Google parent Alphabet (NASDAQ:GOOG, GOOGL).
On the other hand, if Meta continues to cut costs successfully and capitalize on generative AI, and if the digital ad market remains strong, it could hit the high end of earnings forecasts in 2025 ($26.50 per share). If this happens, shares could hit prices well above Wedbush’s prior price target.
Roblox (RBLX)
Roblox (NYSE:RBLX) is another one of the stocks with lowered price targets from Wedbush following a quarterly earnings release. The online entertainment platform operator beat expectations with its latest numbers, but analysts and investors were very disappointed in its updates to guidance.
With Roblox guiding for much lower adjusted revenue through the rest of 2024, it’s no surprise that RBLX stock fell 22% after the earnings release. It’s also unsurprising that Wedbush slashed its price target from $56 to $46 per share. The analyst firm, however, does continue to give shares an “outperform” rating.
In my view, even with this target cut, Wedbush remains generous in its assessment of Roblox. With the company continuing to report net losses, its current market cap of around $20.3 billion appears excessive. Unless growth quickly picks back up, it’s hard to see shares sustaining, much adding to this current valuation.
On the date of publication, Thomas Niel 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.