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. Keeping that in mind, here are two stocks poised to prove Wall Street wrong and one where the outlook is warranted.
One Stock to Sell:
Smith & Wesson (SWBI)
Consensus Price Target: $15 (-2.8% implied return)
With a history dating back to 1852, Smith & Wesson (NASDAQ: SWBI) is a firearms manufacturer known for its handguns and rifles.
Why Do We Pass on SWBI?
- Sales tumbled by 12.2% annually over the last five years, showing consumer trends are working against its favor
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.1% for the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Smith & Wesson is trading at $15.44 per share, or 48.5x forward P/E. Read our free research report to see why you should think twice about including SWBI in your portfolio.
Two Stocks to Watch:
Dynatrace (DT)
Consensus Price Target: $43.85 (10.9% implied return)
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE: DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Why Are We Positive On DT?
- Billings growth has averaged 24% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Prominent and differentiated software culminates in a premier gross margin of 81.7%
- DT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $39.52 per share, Dynatrace trades at 5.1x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Cohen & Steers (CNS)
Consensus Price Target: $66 (-8% implied return)
Founded in 1986 as a pioneer in real estate investment trusts (REITs), Cohen & Steers (NYSE: CNS) is an investment manager specializing in real estate securities, infrastructure, real assets, and preferred securities for institutional and individual investors.
Why Should CNS Be on Your Watchlist?
- Annual tangible book value per share growth of 20.7% over the last two years was superb and indicates its capital strength increased during this cycle
- Industry-leading 37.3% return on equity demonstrates management’s skill in finding high-return investments
Cohen & Steers’s stock price of $71.74 implies a valuation ratio of 20.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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