Beware owning these stocks during earnings season, says Goldman Sachs

As Q2 earnings season commences, Goldman Sachs has cautioned investors against specific "sell-rated names" from its recent note, projecting significant downside risk due to their 2025 estimates being at least 2% below consensus and potential for earnings misses. The bank highlighted Hershey (10% implied downside), Victoria's Secret (14% additional downside), and eBay (29% potential stumble), attributing risks to factors like leadership transitions, recession sensitivity in discretionary categories, and tariff policy uncertainties. This advisory serves as a key warning for institutional investors navigating the current earnings cycle.

Analysis

Goldman Sachs has issued a specific warning on several sell-rated stocks as the Q2 earnings season begins, identifying names with at least 5% downside to its price targets and 2025 earnings estimates that are a minimum of 2% below consensus. The advisory highlights significant fundamental risks for specific companies. For The Hershey Company (HSY), which has already slipped 3% this year, Goldman projects an additional 10% downside, a view compounded by a major leadership transition as Wendy's CEO Kirk Tanner is set to succeed Michele Buck. Victoria's Secret (VSCO) is another key focus of bearish sentiment, with Goldman foreseeing a 14% decline on top of the stock's 54% plunge in 2025; this view is reinforced by a Wells Fargo downgrade citing the lingerie retailer's sensitivity to recessionary pressures on non-essential goods and its unproven pricing power. E-commerce firm eBay (EBAY) has rallied 25% this year, but Goldman anticipates a 29% reversal, a concern echoed by Bernstein's recent downgrade, which points to potential disruption in its China-sourced inventory growth channel from unresolved tariff policies. The list of at-risk companies also includes Lazard, Super Micro Computer, and American Airlines, signaling broad-based caution on specific names with weak underlying fundamentals.

Key Decisions for Investors

• Investors holding the flagged stocks, including HSY, VSCO, EBAY, LAZ, SMCI, and AAL, should review their positions for heightened risk ahead of earnings, given the explicit sell ratings and warnings of potential estimate misses.
• For exposure to eBay, closely monitor developments in U.S.-China tariff policies, as disruptions to its China-sourced inventory channel are identified as a primary headwind to its growth.
• Holders of Victoria's Secret should scrutinize upcoming results for evidence of sustained pricing power and resilience against a slowdown in discretionary consumer spending, which analysts have flagged as a key vulnerability.
• Given the impending CEO change at Hershey, it is prudent to assess the execution risk and any shifts in strategic direction communicated by the new leadership upon taking the helm in August.