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PayPal receives one more downgrade, Unity cut to Underperform: 4 big analyst cuts

Published 02/13/2024, 08:11 AM
Updated 02/13/2024, 08:11 AM
© Reuters. — Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at PayPal, Unity Software, Cadence Design Systems, and Duckhorn Portfolio.

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PayPal receives one more downgrade

PayPal Holdings (NASDAQ:PYPL) shares fell more than 1% pre-market today after Daiwa Securities downgraded the company to Neutral from Outperform with a price target of $62.00 (from $64.00), as reported in real-time on InvestingPro.

This represents the third downgrade since last Wednesday when the company reported its quarterly results. While it posted better-than-expected Q4 EPS and revenues, its shares fell sharply on Thursday due to a flat profit forecast.

Unity Software cut to Underperform

Macquarie downgraded Unity Software (NYSE:U) to Underperform from Neutral with a price target of $20.00, noting that the company's efforts to reduce staff costs are insufficient to address the underlying issues within the company.

Macquarie's downgrade stems from three main concerns. Firstly, they are worried about the scope of reorganization the company is currently undertaking, which includes key ironSource departures. This is because "the ad tech merger has underperformed”. Secondly, they "expect a delay in game engine monetization until 2025 due to likely lower Unity seat licenses as game developers have laid off staff as well." Macquarie also sees delayed revenue upside from price increases and runtime fees until after Unity 6 launches.

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Two more downgrades

Rosenblatt downgraded Cadence Design Systems (NASDAQ:CDNS) to Neutral from Buy, while raising its price target to $280.00 from $265.00.

The analysts noted that Cadence's Q4/23 results, announced Monday after market close, aligned closely with revenue projections and exhibited slightly improved margins. Although Cadence's initial fiscal 2024 guidance matched the analyst's growth expectation of 11.6%, the Q1/24 revenue forecast was about 10% lower than anticipated. This shortfall is partly attributed to a modest 3% year-over-year increase in the Backlog, reaching $6 billion in Q4. The Q1 revenue projection of $990 million to $1,010 million (with a midpoint of $1,000 million) fell significantly short of the consensus estimate of $1,090.3M.

Given current price levels, we are downgrading our rating to Neutral from Buy and expect the stock to react negatively in the near term to the lower Q1 outlook and the weaker expected contribution from China in 2024.

Shares are currently down 7% in pre-market.

BofA Securities downgraded Duckhorn Portfolio (NYSE:NAPA) to Underperform from Neutral with a price target of $8.00 (from $11.00). As a result, shares dropped more than 4% pre-market today.

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