Sellside analysts spent their weekends ripping up their models and downgrading stocks across the board after President Donald Trump’s sweeping tariff announcement ratcheted up expectations for a downturn.
Investors woke up Monday morning to find marquee names, including Starbucks Corp. and Caterpillar Inc., with their ratings, price targets and estimates slashed. Wall Street didn’t spare their own, even Goldman Sachs Group Inc. fell under the knife as analysts surveyed the impact U.S. trade policies would have on their coverage.
Those who do bottom-up analyses to make recommendations on whether to buy or sell shares of American companies have been busy lowering their views at a pace rivaled only during other periods of extreme stress. Economists warn that Trump’s tariffs will cause a recession, which would dent corporate profits and upend investment cases for producers of everything from oil to computer chips to clothing and household goods.
“Given the severe decline over the past week, many of these stocks have seen a resetting of expectations that required a response from the analysts,” Mark Hackett, chief market strategist at Nationwide. “We are entering earnings season, with managements heavily incentivized to provide cautious guidance.”
Fresh off its biggest rout since Covid, the S&P 500 slipped 0.6% as of 3:42 p.m. in New York. Meanwhile, the Nasdaq 100 eked out a small gain after the tech-heavy gauge entered a bear market on Friday.
‘Economic Armageddon’
Baird downgraded both Starbucks and Chicago restaurant chain Portillo’s Inc. to neutral from outperform, predicting that tariffs will weigh on consumer confidence and increase the odds of a significant pullback in consumer spending. Other analysts at the firm also cut their ratings on Target Corp. and Arhaus Inc. to neutral, recommending investors reduce their exposure to businesses with “more relative risk” to discretionary demand.
Analysts at Bernstein lowered General Motors Co. rating to underperform from market perform on the expectation that intensifying tariff pressures and weakening consumer sentiment will weigh on shares of the carmaker. Meanwhile, at UBS ratings on Delta Air Lines Inc., United Airlines Holdings Inc. and Alaska Air Group Inc. were cut on the rising risk of a U.S. recession.
The increasing odds of a downturn were also flagged at Morgan Stanley as analysts tempered their view on large- and mid-cap banks. Notably, they downgraded Goldman Sachs to equal-weight from overweight on its reliance on investment-banking revenue, which is particularly sensitive to deteriorating market conditions. The analysts also cut their sector view on financial advisers and consumer-finance stocks.
In the world of tech, Wedbush slashed its price target on Apple Inc. citing the “tariff economic Armageddon” that was unleashed by Trump. Then, in media stocks, Raymond James moved Pinterest Inc. to market perform from outperform, saying uncertainty around tariffs will weigh on discretionary and brand spending.
Machinery stocks weren’t spared. UBS cut its ratings on Caterpillar Inc. and Cummins Inc. to sell, warning of a further slowdown in demand. The analysts downgraded building materials companies Martin Marietta Materials Inc. and Vulcan Materials Co., too.
“Everybody’s trying to model supply and demand, but we really don’t have precedent for this,” said Steve Sosnick, chief strategist at Interactive Brokers, adding that while there have been tariffs before they were well telegraphed and targeted. “The rhetoric coming from the administration made it unclear as to whether these tariffs are all permanent across the board or if there’s room for negotiation.”
Company analysts were not alone in changing their calls. Wall Street strategists have reined in their views over the last few days, with Oppenheimer’s John Stoltzfus being the latest to slash his year-end target.
For the better
But analysts managed to find some bright spots.
Discount retailers were highlighted as a beneficiary from the tariffs. Citi analysts raised their recommendation on Dollar Tree Inc. to buy, anticipating higher across-the-board tariffs being a positive, saying the company would be a winner in a backdrop of rising retail prices. Dollar General Corp. was lifted to neutral in the process.
Jefferies moved Scotts Miracle-Gro Co. to buy, citing its defensive-nature. The broker sees lawn and garden spend remaining resilient while DIY activity picks up during economic contractions.
And analysts still see room for gains even on downgraded stocks. While Baird cut Target to neutral, the broker has a $110 price target on the stock — above the $93.95 the retailer currently trades at. Similarly, UBS sees upside on Delta and Alaska, which still trade below the broker’s new targets.
“Equities will find a bottom when the full effects of tariffs on earnings and economic growth are priced in,” said Irene Tunkel, chief US equity strategist at BCA Research. “The bottom of the market appears a long way away, and the S&P 500 may end up as low as 4,000, barring any reversals in trade policy that could undo the damage.”
