MORGAN STANLEY: 5 stocks that are in for a nasty surprise

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Slimed.
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YouTube / whatamess66

It’s earnings season, folks.

Every quarter, as companies announce how they did over the past three months, stock analysts compare the announced results with their predictions.

If a company performs worse than predicted, it’s not good news.

Morgan Stanley has a team of analysts making these types of predictions, and it released a list of the companies it feels will disappoint the most this earnings season.

The stocks listed below have a chance for a near-term event, or catalyst, that would negatively affect the company.

“For each of these stocks, our analyst has high conviction in a view that diverges from the Street’s, and expects a near-term event to drive the stock as the market’s view moves closer to ours,” Morgan Stanley wrote in a note to clients.

So if they are right, you might want to stay away from these companies:


Gilead Sciences (GILD)

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Gregg Alton, Gilead’s executive vice president of corporate and medical affairs.
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Thomson Reuters

Current price: $85.44

Target price: $100

Potential catalyst: Gilead Sciences is a biotech company that relies on sales of hepatitis C and HIV treatment sales. Morgan Stanley believes sales of hepatitis C treatments would be about $200 million below consensus because of a falling European market share and pricing pressures.

Data provided by Morgan Stanley.


Nordstrom (JWN)

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REUTERS/Rick Wilking

Current price: $40.46

Target price: $34

Potential catalyst: E-commerce is pulling customers out of retail stores across the country, and Nordstrom may be hit in the process. It is doing well compared with its competitors, according to Morgan Stanley, but its already high earnings per share and weak consumer sentiment may add to the downside for Nordstrom.

Data provided by Morgan Stanley.


Rackspace Hosting (RAX)

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Wikimedia Commons

Current price: $23.57

Target price: $26

Potential catalyst: Brexit has its hands in Rackspace, as the company has a 25% exposure to the falling pound. It also has been seeing revenue growth slowing as the company transitions to service-only offerings for third-party public clouds, according to Morgan Stanley.

The company is not at a complete loss though, as it is a pure-play company in the growing cloud-computing industry, and it differentiates itself from the competition with superior customer support.

Data provided by Morgan Stanley.


Relypsa (RLYP)

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REUTERS/Brian Snyder

Current price: $19.84

Target price: $9

Potential catalyst: If you only do one thing, you better do it well. Unfortunately for Relypsa, it looks like its only drug, Veltassa, could miss sales estimates by $0.6 million to $0.7 million this quarter, according to Morgan Stanley. This would lead to below-estimate revenues for the company.

Data provided by Morgan Stanley.


United Natural Foods (UNFI)

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Business Insider/Hayley Peterson

Current price: $47.97

Target price: $36

Potential catalyst: The health food trend is a hot one, but maybe not for United Natural Foods. Sales headwinds from retail partners like Whole Foods and difficulty acquiring new partners may lead to falling shares in the future, according to Morgan Stanley.

Data provided by Morgan Stanley.


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