When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. Keeping that in mind, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
Nextdoor (KIND)
Consensus Price Target: $2.01 (6.3% implied return)
Helping residents figure out what's happening on their block in real time, Nextdoor (NYSE:KIND) is a social network that connects neighbors with each other and with local businesses.
Why Is KIND Risky?
- Decision to emphasize platform growth over monetization has contributed to sluggish trends in its average revenue per user
- Persistent EBITDA margin losses suggest the business manages its expenses poorly
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $1.89 per share, Nextdoor trades at 3.5x forward price-to-gross profit. Read our free research report to see why you should think twice about including KIND in your portfolio.
Newmark (NMRK)
Consensus Price Target: $15.50 (2% implied return)
Founded in 1929, Newmark (NASDAQ:NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.
Why Should You Sell NMRK?
- Lackluster 7.4% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Cash burn makes us question whether it can achieve sustainable long-term growth
- ROIC of 2.7% reflects management’s challenges in identifying attractive investment opportunities
Newmark’s stock price of $15.19 implies a valuation ratio of 9.6x forward P/E. If you’re considering NMRK for your portfolio, see our FREE research report to learn more.
Dell (DELL)
Consensus Price Target: $138.14 (1.9% implied return)
Founded by Michael Dell in his University of Texas dorm room in 1984 with just $1,000, Dell Technologies (NYSE:DELL) provides hardware, software, and services that help organizations build their IT infrastructure, manage cloud environments, and enable digital transformation.
Why Are We Cautious About DELL?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Customers were hesitant to make long-term commitments to its offerings as its 5% average ARR growth over the past two years was sluggish
- Free cash flow margin dropped by 9.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Dell is trading at $135.54 per share, or 13.8x forward P/E. Dive into our free research report to see why there are better opportunities than DELL.
High-Quality Stocks for All Market Conditions
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