Short seller: Stryker Corporation shares could crash up to 75%

on Apr 6, 2022
  • Spruce Point says Stryker Corporation stock has up to 75% downside.
  • The short-seller gave reasons for its strong sell opinion in its recent report.
  • Shares of Stryker Corporation has climbed 8.0% in about a month.

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Shares of Stryker Corporation (NYSE: SYK) have recovered 8.0% in about a month – an uptick that investors should use to get out of the stock, suggests Spruce Point in its recent report.

Spruce Point sees downside to $67 a share

Spruce Point has a “strong sell opinion” on Stryker Corporation. The investment manager sees a 35% to an alarming 75% downside in this stock. The report reads:

“Stryker left investors flat-footed when the pandemic hit by not warning investors that it’s true exposure to elective procedures was 50% of sales. We expect deferred CAPEX spending in recent years to pressure free cash flow going forward.”

Restrained financial flexibility that hampers its ability to grow through acquisitions (like before) was among other reasons cited for the bearish call. Stryker is yet to make an official comment on the short-seller’s report.

The many headwinds Stryker is facing

Spruce Point called Stryker on its questionable accounting practices and quoted several headwinds, including supply constraints, inflationary pressures, and inventory management issues that could weigh on the stock moving forward.

“Stryker’s sending mixed signals about extent of supply and inflation challenges, while trying to recruit new analysts to say buy its stock. Due to concerns on accuracy of Stryker’s financial reporting, and tactics it’s using to embellish results, holding shares represent poor risk/reward.”

Such challenges, the report adds, will disable Stryker from achieving its targets for revenue and margin expansion. Spruce Point also has a bone to pick with executive compensation at Stryker that it says isn’t aligned with interests of the shareholders.