In This Article:
Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
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 may be overlooking some important risks and some alternatives with better fundamentals.
Analog Devices (ADI)
Consensus Price Target: $250.40 (25.8% implied return)
Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ:ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.
Why Are We Cautious About ADI?
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Sales tumbled by 13.8% annually over the last two years, showing market trends are working against its favor during this cycle
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Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 8.1 percentage points
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Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
At $194.88 per share, Analog Devices trades at 25.6x forward price-to-earnings. If you’re considering ADI for your portfolio, see our FREE research report to learn more.
AMC Networks (AMCX)
Consensus Price Target: $10.29 (26.1% implied return)
Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ:AMCX) is a broadcaster producing a diverse range of television shows and movies.
Why Are We Out on AMCX?
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Products and services aren't resonating with the market as its revenue declined by 4.6% annually over the last five years
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Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 3.6 percentage points over the next year
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Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
AMC Networks is trading at $6.57 per share, or 1.9x forward price-to-earnings. Check out our free in-depth research report to learn more about why AMCX doesn’t pass our bar.
GXO Logistics (GXO)
Consensus Price Target: $63.93 (40.3% implied return)
With notable customers such as Nike and Apple, GXO (NYSE:GXO) manages outsourced supply chains and warehousing for various companies.