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Why Shopify, Brighthouse Financial, and Zillow Group Slumped Today

By Dan Caplinger – Jun 25, 2019 at 4:37PM

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Valuations and other concerns prompted investors to pull back from some stocks.

Tuesday was a tough day on Wall Street, with market participants moderating their enthusiasm toward the strength of the U.S. economy. Investors have been optimistic, but comments from Fed Chair Jerome Powell about the possibility of an economic downturn threw some cold water on the positive mood. Some bad news from certain individual companies also weighed on sentiment. Shopify (SHOP -1.30%), Brighthouse Financial (BHF -1.78%), and Zillow Group (Z -2.12%) (ZG -2.41%) were among the worst performers. Here's why they did so poorly.

Is Shopify too expensive?

Shares of Shopify lost 9% after stock analysts gave the e-commerce services company poor marks. Wedbush cut its rating on Shopify from buy to neutral and reduced its price target by $35 to $270 per share. To be clear, the analysts were quite happy about the success of Shopify's business, including its ability to attract merchant customers seeking a competitive advantage over rival services. Yet Wedbush is convinced that the company's share price has risen too far to justify current growth expectations. Even after today's pullback, Shopify's stock has doubled so far this year, and that's making it difficult for new investors to climb onboard.

Shopify logo of green bag with white S.

Image source: Shopify.

Brighthouse deals with downbeat comments

Brighthouse Financial saw its stock decline 12% following negative analyst comments of its own. Analysts at Credit Suisse cut their rating on the insurance provider from neutral to underperform, reducing their price target by $13 to $22 per share. Meanwhile, Goldman Sachs was also negative on the stock, with a rating reduction from neutral all the way to sell and a $32 price target, down $7 from its previous mark. Lower interest rates could make it difficult for Brighthouse to get as much interest income, and changes to annuity accounting rules will also likely have an impact on earnings. Until the financial markets show more certainty in their likely future direction, it'll be tough to have complete confidence about what Brighthouse's business will look like in the immediate future.

Zillow faces housing challenges

Finally, shares of Zillow Group were lower by 7%. The company's own real estate market report showed that U.S. home prices fell for the second month in a row, posting a modest 0.1% drop to $226,800 during May. The first decline in April marked the first time in more than seven years that home prices had fallen, and the rate of increase has also slowed over time. Zillow tried to provide reassuring comments, saying that the drop is actually a welcome respite after a sharp and unsustainable climb. Yet Zillow investors seem to fear that competition from other corners could threaten its business, and less promising conditions in housing could contribute to that slowdown at an unfortunate time for the home information specialist.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool has a disclosure policy.

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