According to Morgan Stanley, Allbirds stock has limited upside until the path to profitability becomes clearer. Analyst Alex Straton downgraded Allbirds to balanced from overweight and cut its price target, after a quarterly earnings report showed greater economic uncertainty for retailers. . Allbirds lowered its guidance for the year after citing slowing consumer demand. The footwear retailer has announced a number of cost-cutting efforts, including a “significant” slowdown in the pace of companies’ new hires. The company reported a larger quarterly loss than the previous year. “Recession macroeconomics, slower sales growth, and a potentially longer time to profitability could push out the re-rating catalyst we had hoped for,” Straton wrote in a note. note on Wednesday. “We think the stock is likely to remain range-bound until the path to profitability is clearer.” The analyst also cut his price target by more than half, to $5 from $12, roughly the same as the stock closed Tuesday. Allbirds fell 1% in pre-market trading on Wednesday. The downgrade comes after Allbirds is down more than 65% this year as the market punishes unprofitable growth companies. “Our previous upgrade to Overweight was predicted based on two items – 1) a retracement of the stock post-IPO, & 2) a bullish near-term outlook for Softlines retailers, ” Straton writes. “These businesses typically trade at lower valuations than Softlines retailers and make BIRD’s current lower valuation appear more equitable than we initially thought,” Straton writes. — Michael Bloom of CNBC contributed to this report.