Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here is one stock where Wall Street’s excitement appears well-founded and two where its enthusiasm might be excessive.
Two Stocks to Sell:
Stitch Fix (SFIX)
Consensus Price Target: $5.25 (19.6% implied return)
One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Is SFIX Risky?
- Performance surrounding its active clients has lagged its peers
- Persistent operating margin losses suggest the business manages its expenses poorly
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $4.39 per share, Stitch Fix trades at 15.1x forward EV-to-EBITDA. If you’re considering SFIX for your portfolio, see our FREE research report to learn more.
Corcept (CORT)
Consensus Price Target: $135.25 (70.9% implied return)
Focusing on the powerful stress hormone that affects everything from metabolism to immune function, Corcept Therapeutics (NASDAQ:CORT) develops and markets medications that modulate cortisol to treat endocrine disorders, cancer, and neurological diseases.
Why Do We Think Twice About CORT?
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 16.9 percentage points
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.8% annually
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Corcept’s stock price of $79.12 implies a valuation ratio of 78x forward P/E. Check out our free in-depth research report to learn more about why CORT doesn’t pass our bar.
One Stock to Watch:
Target Hospitality (TH)
Consensus Price Target: $10.50 (44.2% implied return)
Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ:TH) is a provider of specialty workforce lodging accommodations and services.
Why Do We Like TH?
- Highly efficient business model is illustrated by its impressive 25.9% operating margin
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
- Returns on capital are growing as management capitalizes on its market opportunities
Target Hospitality is trading at $7.28 per share, or 22.1x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
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