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

Morningstar analysts grew more cautious about stock valuations during the third-quarter earnings season, cutting fair value estimates of the stocks they cover at the fastest pace since early 2025. At the same time, analysts slowed the pace of fair value increases compared with recent quarters.

Of the 838 stocks under Morningstar analyst coverage, 38 (4.5%) had their estimates cut by a meaningful 10.0% or more. That’s above the 10-year average of 2.5% and above last quarter’s 3.8%. On average, fair value estimates rose by 0.4%, well below last quarter’s 3.1% increase.

Stocks With the Largest Fair Value Estimate Cuts

1. Cogent Communications CCOI: $4.50 from $17.00
2. IREN IREN: $23 from $43
3. Nike NKE: $52.50 from $94.00
4. American Airlines AAL: $6.10 from $10.30
5. ServiceNow NOW: $100 from $165

A large decrease or increase in a stock’s fair value estimate may signal that a company’s fortunes are changing. However, investors should consider how a stock trades compared with that estimate. Nike carries a 4-star Morningstar Rating, indicating that our analysts view it as attractively priced for long-term investors, even after the significant valuation reduction. Cogent, IREN, and ServiceNow each have 3-star ratings, suggesting they are fairly valued, while American Airlines has a 1-star rating, indicating it is overvalued.

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

Cogent Communications

• Fair Value Estimate: $4.50
• Fair Value Decrease: 74%
• Economic Moat: Narrow
• Morningstar Rating: ★★★

“Cogent’s results remain extremely disappointing, with revenue down 4.4% year over year and 1.8% sequentially in the third quarter. Cash flow remains negative, even with the T-Mobile payments. The firm has also hired advisors to explore options for its $700 million bond maturing in 2027.

“The move to hire advisors is worrisome. Yields on Cogent’s 2032 bonds have shot up in recent weeks to more than 14%. The firm spent $125 million buying back these bonds in the quarter, as required by the bonds’ indenture, pulling cash on hand down nearly $200 million to $181 million.

“We cut our fair value estimate for narrow-moat Cogent to $4.50 from $17.00, based on a high probability of a dilutive refinancing. We assume the firm will ultimately issue nearly 100 million shares via warrants at $4 per share to satisfy half of the 2027 maturities, and that any new debt carries a rate above 10%, raising our assumed cost of capital.”

—Michael Hodel, director of equity research

The rest of Hodel’s take on Cogent Communications can be found here.

IREN

• Fair Value Estimate: $37.00
• Fair Value Decrease: 47%
• Economic Moat: None
• Morningstar Rating: ★★★

“IREN’s AI cloud started to scale following its delivery of 50 MW Horizon 1 to Microsoft. First-quarter AI revenue grew 182% sequentially to $200 million. It also expanded contracts with a frontier AI lab. Revenue backlog is now over $20 billion, with two-thirds at or above investment grade.

“Despite positive deal momentum and increasing contracted price per megawatt, IREN lowered its full-year capital expenditure guidance to $20 billion from $25-$30 billion. Management also delayed its goal to hit $4 billion ARR due to design changes and supply constraints.”

—Luke Yang, equity analyst

Take a deeper dive into Yang’s outlook for IREN.

Nike

• Fair Value Estimate: $52.50
• Fair Value Decrease: 44%
• Economic Moat: Narrow
• Morningstar Rating: ★★★★

“Competition and its own missteps have adversely affected Nike over the past three fiscal years. With its restructuring ongoing, the firm anticipates a high-single-digit sales decline in fiscal 2027.

“We downgrade our Morningstar Economic Moat Rating on Nike to narrow from wide and our Morningstar Capital Allocation Rating to Standard from Exemplary. We cut our fair value estimate to $52.50 per share from $94 (prior to placing under review) after reducing near- and long-term financial expectations.

“Nike faces a challenging near-term demand environment as it cleans up its inventory—we anticipate fiscal 2027 will be another tough year. We forecast an 8% sales decline (down from 2% prior), a 5.9% operating margin (6.8%), and $1.16 in EPS ($1.69).”

—David Swartz, senior equity analyst

Swartz has more about Nike here.

American Airlines

• Fair Value Estimate: $6.10
• Fair Value Decrease: 41%
• Economic Moat: None
• Morningstar Rating: ★

“American earned $115 million in operating income on third-quarter sales of $16.3 billion. Management is catching up with Delta and United in the premium-segmentation game and announced it will slow capacity growth in 2027 and trade load factor for revenue yield this quarter.

“American Airlines is locked in a struggle to catch up with Delta Air Lines and United Airlines and win back loyal customers willing to pay more or spend mileage points for perks such as lounges, preferred seating, and fancy meals. Recent spikes in fuel prices did not mar competitors’ results the way they did American’s.”

—Nicolas Owens, equity analyst

The rest of Owens’ take on American Airlines can be found here.

ServiceNow

• Fair Value Estimate: $100.00
• Fair Value Decrease: 39%
• Economic Moat: Narrow
• Morningstar Rating: ★★★

“ServiceNow’s third-quarter revenue rose 20.5% to $4.1 billion, while adjusted earnings per share rose 4% and missed FactSet consensus by $0.02. Shares are down roughly 25% on the earnings report.

“The main issue in the results was decelerating growth within guidance and difficulty understanding how AI is driving growth, given the implied deceleration. Combine that with fears of AI disruption for a high-multiple company, and you can get a violent sell-off.

“We are lowering our fair value for narrow moat ServiceNow to $100 per share from $165 after transferring coverage. Our explicit forecasts have not changed materially; instead, our longer-term assumptions, which affect our implied multiple, have become more conservative.”

—Eric Compton, director of equity research

Investors can find more of Compton’s take on ServiceNow here.