In This Article:
The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.
Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here are three stocks where Wall Street’s estimates seem disconnected from reality and some better opportunities to consider.
Xponential Fitness (XPOF)
Consensus Price Target: $14.30 (73.3% implied return)
Owner of CycleBar, Rumble, and Club Pilates, Xponential Fitness (NYSE:XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.
Why Are We Hesitant About XPOF?
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Annual revenue growth of 14.3% over the last two years was below our standards for the consumer discretionary sector
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Poor expense management has led to operating losses
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Push for growth has led to negative returns on capital, signaling value destruction
At $8.25 per share, Xponential Fitness trades at 4.8x forward P/E. Read our free research report to see why you should think twice about including XPOF in your portfolio, it’s free.
Icahn Enterprises (IEP)
Consensus Price Target: $15 (71.4% implied return)
Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.
Why Is IEP Risky?
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Sales tumbled by 16% annually over the last two years, showing market trends are working against its favor during this cycle
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Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.5 percentage points
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50× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Icahn Enterprises is trading at $8.75 per share, or 0.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than IEP.
AMC Entertainment (AMC)
Consensus Price Target: $3.33 (25.5% implied return)
With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE:AMC) operates movie theaters primarily in the US and Europe.
Why Do We Think AMC Will Underperform?
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Products and services aren't resonating with the market as its revenue declined by 3.3% annually over the last five years
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Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
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Short cash runway increases the probability of a capital raise that dilutes existing shareholders