Wall Street doesn’t always get it right.
In fact, it’s always good practice to take analyst opinions with a golf ball-sized grain of salt. That said, Wall Street firms with solid track records can be a useful source of buy recommendations — or, in today’s case, sell recommendations.
Let’s take a look at two popular tech stocks that investment banking giant Goldman Sachs recently slapped a “sell” rating on.
If one of these stocks is sitting in your portfolio, it might be a good idea to take extra caution.
Leading off our list is social media giant Twitter, which Goldman initiated with a sell rating on Wednesday.
Along with the bearish stance, Goldman analyst Eric Sheridan planted a price target of $60 on the shares, almost exactly where they sit today.
Sheridan has a generally positive view of the entire U.S. internet sector, suggesting that it still has plenty of room for long-term growth and operating efficiency improvement.
But in the case of Twitter, the analyst thinks its valuation is stretched and that the company’s innovation is largely a “show me story.”
Specifically, Sheridan isn’t entirely convinced that Twitter will be able to appeal to a wider audience base over time or capitalize on the more niche monetization opportunities that its current audience base presents.
In that sense, Sheridan feels that Twitter is more of a publishing platform than a social media platform like Facebook or Snap, which he both recommends as a buy.
Twitter shares slumped as much as 5% on Monday in response to Sheridan’s view.
Next up, we have vacation rental leader Airbnb, which Sheridan also initiated with a sell rating yesterday. The analyst placed a price target of $132 on the stock, representing about 20% worth of downside from where it sits now.
Sheridan had some good things to say about Airbnb, calling the company a market leader in the space with attractive growth and margin expansion opportunities ahead of it.
In fact, the analyst expects compound annual revenue growth of 21% over the next five years and an adjusted profit margin of 32% in 2026. So for growth oriented investors, Airbnb might be worth purchasing using just your spare change.
But at the current valuation, Sheridan thinks Airbnb’s risk/reward tradeoff tilts negative due to the volatile travel environment going forward, a mature end market, and increasingly intense competition.
Airbnb shares quickly plunged 5% on Monday morning after Sheridan’s bearish call, but have largely recovered since.
Go your own way
There you have it: two popular tech stocks that Goldman Sachs recommends you sell today.
Instead of volatile high-profile Internet stocks, risk-averse investors might want to stick with more stable, inflation-proof assets instead.
One steady asset that billionaires like Bill Gates and Warren Buffett are partial to is investing in U.S. farmland.
In fact, Gates is America's biggest owner of farmland and for good reason: Over the years, agriculture has been shown to offer higher risk-adjusted returns than both stocks and real estate.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.