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 is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the skepticism is well-placed.
Two Stocks to Sell:
Qualcomm (QCOM)
Consensus Price Target: $180.48 (-15.9% implied return)
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ: QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Why Are We Hesitant About QCOM?
- Sales are projected to tank by 8.8% over the next 12 months as demand evaporates
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 7.2 percentage points
Qualcomm is trading at $214.58 per share, or 22.6x forward P/E. If you’re considering QCOM for your portfolio, see our FREE research report to learn more.
Carter's (CRI)
Consensus Price Target: $40.67 (-1% implied return)
Rumored to sell more than 10 products for every child born in the United States, Carter's (NYSE: CRI) is an American designer and marketer of children's apparel.
Why Do We Pass on CRI?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Low free cash flow margin of 6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Carter’s stock price of $41.10 implies a valuation ratio of 12.4x forward P/E. Check out our free in-depth research report to learn more about why CRI doesn’t pass our bar.
One Stock to Buy:
JFrog (FROG)
Consensus Price Target: $82.15 (2.2% implied return)
Named after the amphibian that continuously evolves from egg to tadpole to adult, JFrog (NASDAQ: FROG) provides a platform that helps organizations securely create, store, manage, and distribute software packages across any system.
Why Are We Backing FROG?
- Ability to secure long-term commitments with customers is evident in its 23.7% ARR growth over the last year
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- FROG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $80.37 per share, JFrog trades at 14.7x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.
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