Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like 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 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:
Kohl's (KSS)
Consensus price target: $19.21 (-21% implied return)
Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE: KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.
Why Do We Steer Clear of KSS?
- Failure to add new stores points to soft demand and a focus on boosting sales at current locations
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Subpar operating margin of 3.7% constrains its ability to invest in process improvements or effectively respond to new competitive threats
At $24.33 per share, Kohl's trades at 15.5x forward P/E. If you’re considering KSS for your portfolio, see our FREE research report to learn more.
CSX (CSX)
Consensus price target: $53.81 (0.8% implied return)
Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ: CSX) is a transportation company specializing in freight rail services.
Why Do We Think CSX Will Underperform?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Disappointing unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 4.4 percentage points
CSX is trading at $53.40 per share, or 22.7x forward P/E. Read our free research report to see why you should think twice about including CSX in your portfolio.
One stock to buy:
NerdWallet (NRDS)
Consensus price target: $11.50 (1.3% implied return)
Born from founder Tim Chen's frustration with the lack of transparent credit card information when helping his sister in 2009, NerdWallet (NASDAQ: NRDS) is a digital platform that provides financial guidance to help consumers and small businesses make smarter decisions about credit cards, loans, insurance, and other financial products.
Why Is NRDS a Top Pick?
- Annual revenue growth of 24.3% over the past five years was outstanding, reflecting market share gains this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
NerdWallet’s stock price of $11.36 implies a valuation ratio of 6.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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