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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.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. That said, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.

ZoomInfo (ZI)

Consensus Price Target: $11.17 (8.6% implied return)

Founded in 2007 as DiscoveryOrg and renamed after a merger in 2019, ZoomInfo (NASDAQ:ZI) is a software as a service product that provides sales departments with access to a database of prospective clients.

Why Are We Out on ZI?

1. Flat billings over the last year suggest it may need to improve its products, pricing, or go-to-market strategy to reinvigorate demand

2. Complex implementation process for enterprise clients means customers take longer to ramp up, as seen in its extended payback periods

3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 10.3 percentage points

ZoomInfo’s stock price of $10.28 implies a valuation ratio of 2.9x forward price-to-sales. Check out our free in-depth research report to learn more about why ZI doesn’t pass our bar.

GMS (GMS)

Consensus Price Target: $83.33 (13.9% implied return)

Founded in 1971, GMS (NYSE:GMS) distributes specialty building materials including wallboard, ceilings, and insulation products, to the construction industry.

Why Is GMS Not Exciting?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy

2. Estimated sales decline of 3.7% for the next 12 months implies a challenging demand environment

3. Earnings per share have contracted by 13.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance

GMS is trading at $73.17 per share, or 9.4x forward P/E. Dive into our free research report to see why there are better opportunities than GMS.

Rivian (RIVN)

Consensus Price Target: $14.65 (-10.1% implied return)

The manufacturer of Amazon’s delivery trucks, Rivian (NASDAQ:RIVN) designs, manufactures, and sells electric vehicles and commercial delivery vans.

Why Do We Think Twice About RIVN?

1. Negative 52.8% gross margin means it loses money on every sale and must pivot or scale quickly to survive

2. Cash-burning history makes us doubt the long-term viability of its business model

3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders