Morningstar

5 Stocks with the Largest Fair Value Estimate Cuts After Q3 Earnings

Fiserv and FMC are among the stocks with the deepest reductions.

New York Stock Exchange artwork
Securities in This Article
Endava PLC ADR
(DAVA)
Fiserv Inc
(FISV)
FMC Corp
(FMC)
Intellia Therapeutics Inc
(NTLA)
Optimum Communications Inc Class A
(OPTU)

Third-quarter earnings were largely positive for the 840 US-listed stocks covered by Morningstar analysts. However, some stocks saw their fair value estimates slashed.

Among the stocks on Morningstar’s coverage list, 37, or 4.4%, had their fair value estimates cut by a meaningful 10.0% or more. That’s above the 10-year average of 3.4% and more than the second quarter’s 2.9%. On average, fair value estimates rose by 2.5% in the third quarter, slightly below the second quarter’s 2.7% increase.

Stocks With the Largest Fair Value Estimate Cuts

  1. Intellia Therapeutics NTLA: $27 from $60
  2. Optimum Communications OPTU: $2 from $4
  3. Endava DAVA: $13.60 from $27.00
  4. FMC FMC: $60 from $95
  5. Fiserv FISV: $126 from $198

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 5 stars, meaning our analysts think they’re attractively priced for long-term investors. This holds even after their big valuation cuts. Optimum has a 3-star rating, indicating our analysts think it’s fairly valued.

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

Intellia Therapeutics

“Intellia’s shares tanked over 40% on Oct. 27 after it paused two phase 3 trials for Nex-z. One patient receiving the treatment for ATTR-CM was hospitalized due to severe signs of liver damage.

“Nex-z is one of Intellia’s leading late-stage programs, and over 450 patients have been dosed. Investors’ reaction underscores the heightened risk Intellia faces from clinical trial setbacks, given its lack of approved drugs and reliance on its pipeline candidates.

“We lowered our fair value estimate to $27 per share from $60 for no-moat Intellia, reflecting a 15% probability of approval for both Nex-z trials, down from 40%.”

—Rachel Elfman, equity analyst

Investors can find more of Elfman’s take on Intellia here.

Optimum Communications

Optimum Communications, formerly Altice USA, officially rebranded as of Nov. 7. Its ticker changed to OPTU (formerly ATUS) on Nov. 19.

“Altice USA reported weak customer metrics, while revenue and EBITDA declined 5% and 3%, respectively. Margins improved year over year for the first time since 2023. Management reiterated its aggressive 2025 EBITDA target and declined to discuss the firm’s capital structure.

“Altice remains an underperformer versus Comcast and Charter, which are also struggling to attract customers. Altice lost 58,000 net broadband customers during the third quarter, worse than a year ago (50,000 lost).

“We cut our fair value estimate to $2 from $4. We don’t see a clear path for Altice to improve its financial position. With Altice’s massive debt load, extremely small changes in our forecast produce large shifts in our equity valuation.”

—Michael Hodel, director of equity research

Read Hodel’s full take on Optimum here.

Endava

“Endava missed FactSet consensus on first-quarter results and second-quarter guidance and also cut full-year guidance. Shares were down 27% intraday Nov. 11. The bad news just keeps on coming for Endava. First-quarter results suffered from an unexpected credit made to a client and a poor pipeline conversion rate for smaller deals.

“We cut our fair value estimate to $13.60 from $27.00 for narrow-moat Endava. Shares continue to look undervalued, but we caution investors that visibility remains very low. While we still believe a cyclical recovery in IT services will benefit the company, we have serious doubts that performance will ever recover to historical levels. Consequently, we cut our normalized growth rate and EBIT margin to 5% and 12.5%, respectively (previously 7% and 17%).”

—Rob Hales, senior equity analyst

Take a deeper dive into Hales’ outlook for Endava.

FMC

“FMC’s third-quarter results reflected a challenging near-term outlook as the company deals with patent expirations in its largest product category. The shares were down 44% at the time of writing on Oct. 30 as management reduced its full-year guidance and cut the dividend.

“Management’s prior guidance was for strong profit growth in the second half of the year as inventory destocking, which weighed on first-half profits, ended. While volume was up, this guidance cut was due to increased generic competition resulting in lower prices and profits.

“We’ve reduced our fair value estimate for narrow-moat FMC to $60 per share from $95. We’ve also downgraded our Uncertainty Rating to Very High from High as we see additional risk and a wider range of outcomes due to FMC’s elevated debt levels.”

—Seth Goldstein, senior equity analyst

The rest of Goldstein’s take on FMC can be found here.

Fiserv

“Fiserv’s third-quarter numbers were weak and management pointed to a much more difficult future, sending the shares into a spiral on Oct. 29. Year-over-year organic growth was only 1%, with the merchant segment up 5% and the financial segment down 3%. Adjusted operating margin declined 320 basis points year over year.

“With a new CEO in place, management reviewed the company’s position and determined that Fiserv had been attempting to maximize near-term growth and margins in a way that could not be maintained. The company will now raise investment (which will lower margins) and expects growth to decline. Essentially, management pointed to more quarters like this one ahead, until Fiserv resets to a more stable base.”

—Brett Horn, senior equity analyst

Horn has more about Fiserv stock 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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