Morningstar

5 Stocks with the Largest Fair Value Estimate Cuts After Q2 Earnings

Centene and Exact Sciences are among the stocks with the deepest reductions.

Collage illustration of pie chart featuring an investor holding binoculars, a stack of coins, and a whisker chart.
Securities in This Article
iQIYI Inc ADR
(IQ)
Cogent Communications Holdings Inc
(CCOI)
Centene Corp
(CNC)
Sabre Corp
(SABR)

Second-quarter earnings were largely positive for the 843 US-listed stocks covered by Morningstar analysts. However, some companies saw their fair value estimates slashed.

Among the 843 stocks on Morningstar’s coverage list, 2.5% had their fair value estimates cut by a meaningful 10.0% or more—below the 10-year average of 3.1% and less than half of last quarter’s 6.6%. On average, fair value estimates rose by 2.0% this quarter, a sharp reversal from the 0.4% decrease seen last quarter.

Stocks With the Largest Fair Value Estimate Cuts

  • iQIYI IQ: $1 from $2
  • Sabre SABR: $3.00 from $4.87
  • Centene CNC: $70 from $92
  • Cogent Communications CCOI: $50 from $63
  • Exact Sciences EXAS: $54 from $68

A large cut or increase in a fair value estimate may signal that a company’s fortunes are changing. However, it’s important to consider how a stock trades compared with that estimate. Four of the five stocks with the largest fair value cuts have Morningstar Ratings of 4 or 5 stars, meaning our analysts think they’re attractively priced for long-term investors. This holds even after their big valuation cuts. iQIYI has a 1-star rating, indicating our analysts think it’s overvalued.

Here’s what Morningstar’s analysts have to say about these stocks.

iQIYI

“Long-form video platforms continue to lose market share as younger generations prefer quick content. User-generated content, which faces less regulation and can respond to trends much faster, is accelerating this shift, creating additional headwinds for platforms like iQIYI.

“We no longer expect iQIYI’s subscriber count to recover. Instead, we expect a gradual decline over the next decade. As a result, we now forecast essentially flat revenue for the company till 2034.

“We lower our fair value estimate for no-moat iQIYI to $1 from $2 and maintain a Very High Morningstar Uncertainty Rating. With shares trading at $1.80, we consider iQIYI overvalued.”

—Ivan Su, senior equity analyst

Su has more about iQIYI stock here.

Sabre

“Sabre severely cut its guidance for second-half air booking growth to 4%-10% from 20%. The firm gave equal weight to weaker industry demand, its higher US government, corporate, and regional mix, and the timing of an IT project, all of which should be transitory headwinds.

“We have decreased our fair value estimate for narrow-moat Sabre to $3 per share from $4.87. While the shares appear undervalued, price action could remain volatile, given the precarious environment for business and corporate travel. We maintain our Very High Uncertainty Rating.”

—Dan Wasiolek, senior equity analyst

Take a deeper dive into Wasiolek’s outlook for Sabre.

Centene

Centene saw its fair value slashed three times during the quarter. The most recent, to $70 from $77, came after the firm reported weak second-quarter earnings. “After withdrawing 2025 guidance in early July due primarily to challenges in the individual exchange market, Centene turned in a second-quarter loss after its medical loss ratio ballooned to 93%, despite 18% growth in premium and service revenue,” wrote senior equity analyst Julie Utterback. “Guidance for 2025 now includes $1.75 of adjusted EPS. Given this even weaker outlook for 2025 that could bleed into 2026-27, we are lowering our fair value estimate on no-moat Centene to $70 per share from $77. With shares only trading at 8 times deflated 2026 expected earnings, we continue to view Centene as undervalued.”

Earlier in the quarter, Utterback lowered Centene’s fair value after the company withdrew its 2025 guidance. “Centene withdrew its guidance primarily due to challenges in its individual plans, including elevated medical utilization that is also plaguing the Medicaid market,” she wrote. “Management quantified the known EPS risks in 72% of its members at $2.75 of its withdrawn 2025 view of at least $7.25.”

Several days later, Centene saw its fair value cut again, due to the Medicaid spending reductions in the budget reconciliation bill. “As the leading provider of Medicaid and individual exchange plans, Centene appears in the cross-hairs of these regulatory moves under Republicans, which puts roughly 17 million people at risk of losing their insurance in the next few years,” Utterback wrote.

Investors can find Utterback’s full take on Centene stock here.

Cogent Communications

“Shares of Cogent sank over 20% following its second-quarter earnings release, as investors were left uninspired about the potential of a successful and accretive rollup of the Sprint wireline assets. Revenue and margins were decent, but Cogent’s obscured future is what is on investors’ minds.

“T-Mobile paid Cogent $700 million to take the cash-burning Sprint business, and Cogent promised a smooth transition that would be accretive to shareholders. That has not materialized, and with net debt climbing to 7.5 times EBITDA, Cogent’s future is highly uncertain.

“We lowered our fair value estimate to $50 from $63 following the disappointing quarter, as we’ve lowered our long-term estimate for narrow-moat Cogent’s wavelength revenue. Additionally, we’ve lowered our near-term margin outlook as the transformation is taking longer than expected.”

—Samuel Siampaus, equity analyst

Siampaus has more about Cogent Communications stock here.

Exact Sciences

“Exact Sciences reported second-quarter revenue growth of 16% year on year and raised full-year revenue growth guidance to 14.2% at the midpoint. It also announced that the data for its blood-based colorectal cancer screening test narrowly failed to meet Medicare’s cutoff for reimbursement.

“The quarter’s results are excellent, although we would like to see costs come down sooner. However, the data for its CRC screening test is disastrous, and it contradicts the confidence that management has displayed over the past few earnings calls.

“We are lowering our fair value for no-moat Exact to $54 per share from $68 to account for our downgraded view of its CRC screening market share. Although in-licensing Freenome’s test makes strategic sense to help maintain market share, the economics will be less favorable compared with a home-grown test.”

—Jay Lee, senior equity analyst

Read Lee’s full take on Exact Sciences here.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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