Fourth-quarter earnings were largely positive for the 856 US-listed stocks covered by Morningstar analysts. However, some companies saw their fair value estimates slashed.
Among the stocks on Morningstar’s list, the average change in fair value estimate was a 1.99% increase, above the 10-year average increase of 1.45% per earnings season. Meanwhile, about 4% saw their estimates cut by a meaningful amount of 10% or more.
Stocks With the Largest Fair Value Estimate Cuts
- Sunrun RUN: $10 per share from $15
- Polaris PII: $75 per share from $110
- Moderna MRNA: $102 per share from $141
- Biogen BIIB: $220 per share from $303
- STMicroelectronics STMPA: $32 per share from $44
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. All 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.
Here’s what Morningstar’s analysts had to say about these stocks.
Sunrun
- Fair Value Estimate: $10.00
- Fair Value Decrease: 33%
- Economic Moat: None
- Morningstar Uncertainty Rating: Very High
Sunrun had the largest fair value cut this quarter due to challenges the firm may face under the Trump administration, according to equity analyst Brett Castelli. “The US solar industry benefits from federal incentives, most notably a 30% investment tax credit,” he says. “Under the Inflation Reduction Act, the federal incentives for renewables were extended until at least 2032, but we see this date as being at risk under the Trump administration. While a full repeal of the act is unlikely, we do expect changes to wind and solar tax credits. Our base case is the administration accelerates the expiration to 2027 from 2032 currently.”
Sunrun is trading at a 28% discount to its new fair value estimate and has a Morningstar Rating of 4 stars.
Find Castelli’s full take on Sunrun here.
Polaris
- Fair Value Estimate: $75.00
- Fair Value Decrease: 32%
- Economic Moat: Wide
- Morningstar Uncertainty Rating: Medium
“As Polaris closes the book on a tough 2024, with fourth-quarter sales down 23% and adjusted earnings per share of $0.92 down 54%, its outlook signals it isn’t out of the woods,” says senior equity analyst Jaime Katz. “With 2025 sales set to fall 1%-4% and EPS set to decline 65% to $1.10, cost pressures remain at the forefront. Lower shipments persist as both dealers and consumers show caution around category spending. In Polaris' initial 2025 outlook, sales in off-road and on-road are slated to decline again, while very depressed marine sales could rise at a low-single-digit rate.”
Polaris is trading at a 40% discount to its new fair value estimate and has a Morningstar Rating of 5 stars.
Take a deeper dive into Katz’s outlook for Polaris.
Moderna
- Fair Value Estimate: $102.00
- Fair Value Decrease: 28%
- Economic Moat: None
- Morningstar Uncertainty Rating: Very High
“On Jan. 13, Moderna cut its 2025 sales guidance to $1.5 billion-$2.5 billion, down from prior guidance of $2.5 billion-$3.5 billion, partly due to waning covid vaccine demand and a slow RSV vaccine launch,” says director of equity research Karen Andersen. “Also, a phase 3 trial of its CMV vaccine did not meet an efficacy hurdle for an early readout. Reduced expectations and depressed shares pressure the firm to increase revenue and reduce its cash burn rate to avoid diluting shareholders by selling shares near recent lows.”
Moderna is trading at a 70% discount to its new fair value estimate and has a Morningstar Rating of 5 stars.
Read Andersen’s full take on Moderna here.
Biogen
- Fair Value Estimate: $220
- Fair Value Decrease: 27%
- Economic Moat: Narrow
- Morningstar Uncertainty Rating: High
“Narrow-moat Biogen reported results that were in line with our expectations,” says senior equity analyst Jay Lee. “Revenue guidance for 2025 is a mid-single-digit decline at constant currency, which we find slightly disappointing. We are lowering our fair value estimate to $220 per share from $303 due to lower forecasts for key drugs, especially Alzheimer’s drug Leqembi. There is a wide range of outcomes for its peak revenue. Still, due to its slow sales ramp and the potential for competing drugs to eventually enter this space, we adopt a more cautious view and lower our peak revenue forecast to $3 billion from $6 billion.”
Biogen is trading at a 36% discount to its new fair value estimate and has a Morningstar Rating of 4 stars.
Lee has more about Biogen stock here.
STMicroelectronics
- Fair Value Estimate: $32
- Fair Value Decrease: 27%
- Economic Moat: Narrow
- Morningstar Uncertainty Rating: High
“Narrow-moat STMicroelectronics reported decent fourth-quarter results but provided investors with a disappointing forecast for the March quarter and indicated that it had little visibility into if and when business conditions would improve later this year,” says equity strategist Brian Colello. “A slowdown in European manufacturing activity, on top of an already-severe inventory correction in key end markets, will likely drive ST into another year of revenue declines and gross margin erosion. The forecast reduces our confidence in the firm’s ability to bounce all the way back to achieve its 2028 target of $18 billion of revenue. We are cutting our long-term revenue forecast rather dramatically and, in turn, reducing our fair value estimate to $32 from $44. Given the 10% selloff to the $22 range, ST still appears undervalued, but we have less confidence in a massive business recovery in the near to medium term.”
STMicroelectronics is trading at a 23% discount to its new fair value estimate and has a Morningstar Rating of 4 stars.
The rest of Colello’s take on STMicroelectronics can be found here.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
