Hot Stocks: Research note lifts CHWY; LUMN downgrade; EV names face pressure; AMT, SBAC drop

A choppy day of trading finished with stocks posting modest losses on Wednesday. While the major U.S. equity averages flirted with positive territory late in the day, the lower finish ultimately halted the sharp rebound that marked the first two days of the week.

The electric vehicle sector was hit hard on the day. Tesla (TSLA) dropped again following a rebound on Tuesday. Meanwhile, XPeng (XPEV), Blink Charging (BLNK) and ChargePoint (CHPT) also showed notable weakness.

The session also saw downward pressure on real estate investment trusts related to wireless infrastructure. SBA Communications (SBAC) and American Tower (AMT) both set fresh intraday 52-week lows during the session, although each managed to avoid establishing a new closing nadir.

Among individual stocks, Lumen Technologies (NYSE:LUMN) dropped on an analyst’s downgrade. Meanwhile, Chewy (CHWY) advanced after a research firm signaled that the company was on track to exceed sales expectations for the current quarter.

Sector In Focus

Stocks related to the electric vehicle sector came under pressure. The retreat took place amid lingering concerns about Tesla’s recent deliveries figures and heightened worries about regulatory scrutiny in the U.S.

Tesla represented the most prominent stock to fall as part of the broader slide. Shares of Elon Musk’s EV maker dropped 3%. The stock had fallen almost 9% on Monday following the release of disappointing Q3 deliveries figures, before rebounding by around 3% on Tuesday.

The sector received another dent on Tuesday, when the Biden administration declared that some EV batteries from China had connections with supplies produced with child labor. The government said it would put lithium-ion batteries on a list of goods made with materials known to be produced by child or forced labor, pointing to cobalt mined in the Democratic Republic of Congo.

With the added regulatory complication, a number of sector names experienced a setback. The losses included other EV makers and carried over to EV infrastructure stocks as well. This included XPeng (XPEV), which dropped 8%. Meanwhile, Blink Charging (BLNK) dipped 6% and ChargePoint (CHPT) fell 4%.

Standout Gainer

Chewy (CHWY) gained ground in the wake of research suggesting that the online pet supply retailer will likely beat Q3 sales expectations.

YipitData said CHWY was “trending above consensus” on its top line. Analysts currently expect a Q3 figure of $2.46B, according to Seeking Alpha data, a rise of 11% from last year.

CHWY finished Wednesday at $36.67, an advance of $3.52 on the day. The advance took the stock to its highest close since the first half of September. Shares had topped $50 as recently as mid-August.

Standout Decliner

An analyst’s downgrade sparked selling in Lumen Technologies (LUMN), with the stock declining more than 9% amid concerns about its dividend.

Wells Fargo lowered its rating on the telecommunications company from Overweight to Equal Weight. This came as analyst Eric Luebchow reported signs that the firm’s EBITDA might be trending lower than expected.

Luebchow added that free cash flow stats point to a possible dividend cut. “With ~20% or more downside risk in the event of a 50% dividend cut, we see a negative short-term catalyst in the next 3-6 months,” he said.

The cautious commentary sent LUMN lower by 75 cents, with the stock closing at $7.28. Shares also touched an intraday 52-week low of $7.13 and matched a closing low of $7.28 set last week. Shares have fallen about 25% over the past month.

Notable New Low

Real estate investment trusts related to the wireless segment experienced selling pressure. With the retreat, SBA Communications (SBAC) and American Tower (AMT) dropped to new intraday 52-week lows, although both recovered a bit before the close and managed to avoid setting closing lows.

Specifically, SBAC retreated to an intraday 52-week low of $279.49. With a partial rebound during the middle of the day, the stock finished at $283.12, a decline of $10.30 on the session. Following the late bounce, the stock avoided ending below its closing 52-week low of $282.27 set in late September.

SBAC has seen volatile trading in 2022 but losses posted since mid-August currently have the stock down about 25% since the end of last year.

Following a similar intraday pattern as SBAC, AMT dropped $5.94 to close at $214.14, ending the day off a intraday 52-week low of $211.38 set during trading. The stock established a closing low for the year of $213.72 in late September.

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