Clorox is 'dead money at best,' Wells Fargo says in double downgrade
There is not much reason for optimism that the recent downturn for Clorox will reverse any time soon, Wells Fargo said Monday in a rare double downgrade of a stock. The cleaning products company saw a surge in demand at the start of the pandemic, but its shares have dropped nearly 30% since the end of July, and its most recent earnings report saw adjusted earnings per share fall 14% year over year. Wells Fargo analyst Chris Carey dropped Clorox all the way to underweight from overweight, saying in a note to clients that the stock was "dead money at best, with downside, in our view." "We fought the good fight on CLX, arguing for a contrarian play with fundamental disconnects," the note said. "The inflation spike in February made our prior thesis from December challenging, but with 4/30 earnings falling short on top-line and pricing plans muted, numbers need a significant reset, and there's just not much left for us to hold onto at the moment." The biggest change for Clorox in recent months has been rising commodity prices, which is squeezing the company's margins in a way that may be tough to overcome, Wells Fargo said. "This isn't CLX's fault of course, but it did put even more pressure on delivery elsewhere in the P & L, specifically pricing actions and sales catalysts," the note said. The firm slashed its price target on the stock to $170 from $240, implying a downside of more than 6% for Clorox shares.Its stock price was down 1.75% on Monday morning. —CNBC's Michael Bloom contributed to this report.

Clorox Disinfecting Wipes canisters move along a conveyor belt at the company's manufacturing facility in Forest Park, Georgia. Matt Odom | Bloomberg | Getty Images