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 is one stock where you should be greedy instead of fearful and two where the outlook is warranted.
Two Stocks to Sell:
Tesla (TSLA)
Consensus Price Target: $421.27 (16.9% implied return)
Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ: TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.
Why Are We Out on TSLA?
- Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
- The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
- On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.
Tesla’s stock price of $360.45 implies a valuation ratio of 188.1x forward price-to-earnings. Read our free research report to see why you should think twice about including TSLA in your portfolio.
DigitalBridge (DBRG)
Consensus Price Target: $16 (3.9% implied return)
Transforming from a traditional real estate investor to a digital-focused powerhouse in 2021, DigitalBridge Group (NYSE: DBRG) is a global digital infrastructure investment firm that manages capital and operates assets across data centers, cell towers, fiber networks, and edge infrastructure.
Why Do We Think DBRG Will Underperform?
- Sales tumbled by 68.3% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have dipped by 14.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
At $15.40 per share, DigitalBridge trades at 2.2x forward P/E. Dive into our free research report to see why there are better opportunities than DBRG.
One Stock to Buy:
EVERTEC (EVTC)
Consensus Price Target: $32.60 (19.5% implied return)
Operating one of Latin America's leading PIN debit networks called ATH, EVERTEC (NYSE: EVTC) is a payment transaction processor and financial technology provider that enables merchants and financial institutions across Latin America and the Caribbean to accept and process electronic payments.
Why Will EVTC Beat the Market?
- Market share has increased this cycle as its 15.8% annual revenue growth over the last two years was exceptional
- Earnings per share grew by 13.1% annually over the last two years and topped the peer group average
- Industry-leading 29.9% return on equity demonstrates management’s skill in finding high-return investments
EVERTEC is trading at $27.29 per share, or 7.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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