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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.

Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. That said, here are two stocks where Wall Street’s pessimism is creating a buying opportunity and one facing legitimate challenges.

One Stock to Sell:

Monarch (MCRI)

Consensus Price Target: $88 (6.6% implied return)

Established in 1993, Monarch (NASDAQ:MCRI) operates luxury casinos and resorts, offering high-end gaming, dining, and hospitality experiences.

Why Does MCRI Fall Short?

1. 4% annual revenue growth over the last two years was slower than its consumer discretionary peers

2. Estimated sales growth of 2% for the next 12 months implies demand will slow from its two-year trend

3. ROIC of 14.4% reflects management’s challenges in identifying attractive investment opportunities

At $82.52 per share, Monarch trades at 8.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including MCRI in your portfolio, it’s free.

Two Stocks to Watch:

Lyft (LYFT)

Consensus Price Target: $17.06 (3.8% implied return)

Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.

Why Do We Like LYFT?

1. Active Riders have increased by an average of 10.1% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features

2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 72.9% over the last three years outstripped its revenue performance

3. Free cash flow margin expanded by 23.3 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends

Lyft is trading at $16.43 per share, or 13.6x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.

Ulta (ULTA)

Consensus Price Target: $415.85 (0.4% implied return)

Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ:ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.

Why Could ULTA Be a Winner?

1. Store expansion strategy is justified by its healthy same-store sales

2. Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.4% over the past two years

3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets