ARW - Arrow Electronics Avnet stocks slide as Wells Fargo downgrades on slowing demand

Arrow Electronics ( NYSE: ARW ) and Avnet ( AVT ) fell ~4% on Friday after Wells Fargo downgraded the stocks to Underweight from Equal Weight as it expects slowing demand to further drag earnings.

Strong semiconductor/component demand, coupled with shortages and higher prices, led to electronic parts distributors over-earning relative to prior cycles, analyst Joe Quatrochi wrote in a note to clients.

He warned that near-term results likely peaked and are set up for a cycle correction.

"A broadening of weakening demand data points and some deterioration of average component pricing (from record levels) will put additional downward pressure on distributor earnings beyond consensus estimates," said Quatrochi.

The analyst also noted downward pressure from deflationary component pricing headwinds and mix effect related to European recession fears.

Wells Fargo cut its price targets on ARW to $87 from $125 and AVT to $35 from $45. Both new PTs imply potential downside of ~13% to the stocks' last close.

Wall Street analysts on average rate ARW Hold (1 Buy, 7 Hold), in line with SA Quant's Hold rating .

Average sell-side rating on AVT is Hold (1 Strong Buy, 5 Hold, 3 Sell), contrasting SA Quant's bullish rating .

Shares of ARW declined ~29% YTD while AVT stock fell 6.6% .

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