In an otherwise-strong first-quarter earnings season, as profits rose at their fastest pace in four years, some companies came up short, leading Morningstar analysts to slash their fair value estimates. Of the 827 stocks under our coverage, 35 (4.2%) had their fair value estimates cut by a meaningful 10.0% or more. That’s above the 10-year average of 3.4%, but right around last quarter’s 4.1%. On average, fair value estimates rose by 2.7%, below the fourth quarter of 2025’s 3.3% increase.
Stocks with the Largest Fair Value Estimate Cuts
- Iqiyi IQ: $0.50 from $1.00
- Optimum Communications OPTU: $1.00 from $1.80
- The Trade Desk TTD: $21 from $29
- American Airlines AAL: $10.00 from $13.50
- CoStar Group CSGP: $57 from $76
A large decrease or increase in a stock’s fair value estimate may signal that a company’s fortunes are changing. However, for investors, it’s important to consider how a stock trades compared with that estimate. CoStar carries a 5-star Morningstar Rating, indicating that our analysts view it as attractively priced for long-term investors, even after the significant valuation reduction. Optimum and Trade Desk each have 3-star ratings, suggesting they are fairly valued, while 2-star American Airlines and 1-star Iqiyi are considered overvalued.
Here’s what Morningstar’s analysts say about these stocks.
Iqiyi
- : $0.50
- Fair Value Decrease: 50%
- : None
- : ★
“Iqiyi’s first quarter was weak. Revenue fell 13% year over year, and the firm swung to an operating loss from a profit a year earlier. At the same time, management is doubling down on its artificial intelligence strategy, highlighted by the launch of its AI video and film production tool, Nadou Pro.
“Iqiyi’s AI thesis rests on the premise that video content is scarce. We disagree. What remains scarce is high-quality content. Leaning into AI-driven volume addresses a problem the market doesn’t have, likely leading to further content commoditization at weaker unit economics.
“We lower our fair value estimate for no-moat Iqiyi by 50% to $0.50, reflecting a 44% cut to midcycle earnings. The downgrade is mainly driven by a 22% reduction in our revenue forecasts, as users migrate to platforms with higher-quality content, alongside operating deleverage.”
—Ivan Su, senior equity analyst
Investors can find more of Su’s take on Iqiyi.
Optimum Communications
- Fair Value Estimate: $1.00
- Fair Value Decrease: 44%
- Economic Moat: None
- Morningstar Rating: ★★★
“Customer losses at Optimum continued to worsen during the first quarter, with the number of residential customers served declining 6% year over year. Solid growth at Lightpath, the firm’s enterprise services subsidiary, and higher ad revenue limited the revenue decrease to 4%.
“Management’s tone shifted this quarter, indicating that it will use lower prices to improve customer losses. The firm indicated last quarter that it was in a position to stabilize EBITDA, but it now expects a low- to mid-single-digit decline in 2026.
“We lower our fair value estimate to $1 from $1.80. We reiterate our Extreme Uncertainty Rating, which reflects Optimum’s enormous debt load, including a mountain of maturities in 2027.”
—Michael Hodel, director of equity research
Take a deeper dive into Hodel’s outlook for Optimum Communications.
Trade Desk
- Fair Value Estimate: $21.00
- Fair Value Decrease: 28%
- Economic Moat: None
- Morningstar Rating: ★★★
“Trade Desk shares are trading lower after first-quarter earnings showed continued deceleration in growth, increased capital expenditures, and second-quarter guidance below Wall Street growth and margin expectations, according to FactSet.
“Lower growth expectations, disagreements with large customers, continued turnover of senior management, a lack of proprietary data, and a transparency-focused pitch that now seems to be falling on deaf ears help explain why Trade Desk is down 85% from its peak 18 months ago. The first quarter gave no hope for an imminent turnaround.
“We reduce our fair value estimate from $29 to $21, reflecting a decrease in our average annual growth rate forecast over the next five years from 10% to 9% and higher expenses associated with improving the data available on the platform. We believe this investment is necessary for survival.”
—Mark Giarelli, equity analyst
Giarelli has more about Trade Desk stock here.
American Airlines
- Fair Value Estimate: $10.00
- Fair Value Decrease: 26%
- Economic Moat: None
- Morningstar Rating: ★★
“American Airlines reported a $41 million operating loss on $14 billion of revenue in the first quarter. Management is investing in more premium seating to compete with Delta and United and announced that it intends to increase capacity more aggressively than competitors in the coming months.
“American is locked in a struggle to catch up with Delta and United to woo loyal customers willing to pay or spend mileage points for perks like lounges, preferred seating, and fancy meals. We think American has the tools to compete, but it may also fall prey to the temptation to overly aggressively pursue market share.
“We have decreased our fair value estimate for no-moat American’s shares to $10.00 from $13.50, reflecting narrower margins in the wake of higher fuel costs and American’s lower ability to pocket premium yields as it expands its network and takes market share.”
—Nicolas Owens, equity analyst
The rest of Owens’ take on American Airlines can be found here.
CoStar Group
- Fair Value Estimate: $57.00
- Fair Value Decrease: 25%
- Economic Moat: Narrow
- Morningstar Rating: ★★★★★
CoStar saw two fair value estimate cuts during the quarter. The most recent, to $57 per share from $66, came after the stock’s coverage was transferred to a new analyst. “Despite lowering our fair value estimate and moat rating, we believe shares are highly attractive at current valuations, offering a compelling opportunity for patient, long-term investors to build a stake in a resilient compounder with 60 consecutive quarters of double-digit revenue growth,” wrote equity analyst Austin Taggart
Earlier in the quarter, CoStar’s fair value was cut to $66 from $76 following its first-quarter earnings report. “CoStar reported solid first-quarter results, with revenue expanding 23% to $897 million, adjusted EBITDA roughly doubling from the year-ago period to $132 million,” wrote director of equity research Sean Dunlop. “Still, the firm’s shares trended slightly lower in aftermarket trading as investors remain concerned about Homes.com investments. As we digest the quarterly results, we lower our fair value estimate for wide-moat CoStar to $66 per share from $76. This is entirely attributable to recalibrating our cost of capital to better align with our global coverage (as we now assign the firm an 8.3% cost of capital, up from 7.4% previously). Without this, we would have raised our fair value estimate by a low-single-digit percentage.”
Read Taggart’s full take on CoStar here.
