Goldman Sachs downgraded health care apparel retailer Figs, saying consumers will likely spend money elsewhere in the event of an economic downturn.
Shares of Figs Inc. (NYSE:FIGS) slid on Thursday after Goldman Sachs revised its rating to “Sell”.
The bank’s analysts explained that a downgrade from “Neutral” to “Sell” was appropriate given macroeconomic conditions and a likely overoptimistic consensus on Wall Street.
“We believe near-term demand headwinds will be larger and more pronounced than consensus expectations, driving moderating top line growth,” the downgrade note explained. “While we remain constructive on the FIGS brand and continue to see it as a leader in the premium scrubwear category, we believe that inflationary pressures on the consumer may result in deferred or reduced demand for FIGS’s premium and long-lasting product.”
Now’s the time to dump shares of well being care attire model Figs ahead of a possible slowdown within the U.S., as claimed by to Goldman Sachs.
The agency downgraded Figs to promote from impartial and slashed its worth goal on the inventory to $7 per share from $14. The new goal represents draw back of roughly 34%.
Goldman Sachs predicts a 50% likelihood of recession within the subsequent two years and has began to see indicators of deceleration in pockets of the buyer panorama. Generally, the attire sector tends to underperform throughout financial downturns, Roach mentioned.
The Federal Reserve is raising interest rates aggressively to fight high inflation, and while Goldman’s in-house economists are betting there is a 50% chance of a recession in the next two years, Solomon fears the odds are worse.
Goldman Sachs is taking steps to prepare for a deeper economic downturn. When it reported earnings for the second quarter on Monday, it said it has set aside $667 million to cover potential losses, and the company’s CFO announced the bank plans to “slow hiring.”
Mike Mayo, a banking analyst at Wells Fargo Securities, says the current market environment is especially difficult for Wall Street banks. This year, he notes, “we are experiencing the biggest decline in stocks and bonds in over 50 years.”
Recession worries are a major concern for investors, small businesses and Corporate America’s giants. Still, Goldman Sachs (GS) reported better than expected earnings earlier this week, despite a slowdown in deal making and a brutal first half of the year for the stock market.
But Goldman Sachs chief financial officer Denis Coleman had warned during a conference call with analysts that the bank is likely to slow the pace of hiring due to macro concerns.
Solomon reiterated to Harlow Wednesday that Goldman Sachs won’t be adding jobs as aggressively in the second half of this year but he noted that hiring is “not going to zero.” Still, Solomon remained cautious: “I can’t tell you what the world’s going to look like in six months. If the world looks more difficult, we’ll adjust accordingly. We always try to be extremely nimble in how we think about these things.”
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