Goldman Sachs is a well respected company that’s known to make moves in the market by analyzing and grading stocks. However, there have been quite a few Goldman Sachs downgrades that have been sparking quite a bit of controversy in the investing world. Two of the biggest being the downgrades of BlackBerry (BBRY) stock and MannKind (MNKD) stock. So, today, we’re going to take a look at these two downgrades, discuss whether or not these downgrades were really justified, and talk about whether or not investors should still trust Goldman Sachs grading.
BlackBerry (BBRY) Stock Downgraded To Sell
On Sunday, Goldman Sachs published a report that downgraded BlackBerry (BBRY) stock from a “Neutral” rating to a “Sell” rating; changing their target price from $10 to $9 on the stock. As a result, BlackBerry (BBRY) stocks plummeted Monday and Tuesday; falling from $10.67 per share to just over $9.50 per share. While this was happening, I decided to jump over to my favorite social trading room, StockTwits.com to see what was going on. From there, it became clear that the majority of investors and traders in the stream didn’t approve of the downgrade. So, I decided to do some research to see what all the fuss was about.
In an early review, it was almost impossible to find a clear reason for the downgrade. However, as the day rolled on Monday, I was finally able to find a few sources that seemed to give an accurate depiction of why Goldman Sachs decided to downgrade the stock. After a while of researching, I found that the downgrade was due mostly to concerns over the Enterprise Mobility Management Software the company offers. However, in the same note, the analyst mentioned an revenue expectations were on the upside when it comes to hardware.
Was This A Fair Downgrade?
Personally, I don’t think it was. While EMM Software sales may be of a slight concern, upward momentum in hardware sales as well as the company’s proven ability to solve problems tells me that the grade should remain at “Neutral”. According to the movement in the stock today, it looks like most investors agree with me. BlackBerry (BBRY) is currently up 1.33% (trading at $9.90 per share) and is expected to close the day in the green.
MannKind (MNKD) Stock Downgraded To Sell
BlackBerry (BBRY) doesn’t seem to be the first of Goldman Sachs’ downgrade victims for the month either. On March 3rd, analysts at GS downgraded MannKind (MNKD) stock to a “Sell” rating as well. In this case Goldman Sachs placed MannKind (MNKD) stocks price target at $3 per share; insinuating that the company’s stock would fall by about 50%. Following the downgrade, the stock definitely fell. Unfortunately, it fell for a much longer period of time than BlackBerry (BBRY). As a matter of fact, MannKind (MNKD) stock seems to have just started to recover.
The analyst at Goldman Sachs blamed a poor launch of Afrezza. However, at the time of the downgrade, the new drug had just barely hit the market. Reports also mentioned that MannKind (MNKD) was receiving pressure from diabetics to reduce their medication prices, but after quite a bit of research, I haven’t been able to find proof of the concept.
Was The Downgrade Fair?
In my opinion, the downgrade was not fair in this case either. Unfortunately, when I first saw the downgrade, I trusted what Goldman Sachs said. It’s not until the BlackBerry (BBRY) debacle that I chose to question their opinion and do my own research. With Afrezza being such a new drug on the market, it’s unfair to downgrade the company’s stock based on the drug’s performance. I could understand if the drug had been out for a period of 3 to 6 months, but in this case, the downgrade definitely came prematurely.
Should Investors Listen To Goldman Sachs?
In both of these cases, I was able to find numerous examples of analysts that have upgraded the stock ratings rather than downgraded. Unfortunately, I don’t think I’ll be trusting Goldman Sachs based on their word anymore; and I don’t think you should either. Your best bet when you see a GS downgrade from now on is probably going to be to do your own research and come to your own conclusion!