Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here are three stocks where Wall Street’s enthusiasm may be misplaced and some other investments worth exploring instead.
Arhaus (ARHS)
Consensus Price Target: $8.94 (55.8% implied return)
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ: ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Why Is ARHS Not Exciting?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Smaller revenue base of $1.38 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 25.6% annually
At $5.74 per share, Arhaus trades at 12.1x forward P/E. Check out our free in-depth research report to learn more about why ARHS doesn’t pass our bar.
Oshkosh (OSK)
Consensus Price Target: $164.79 (34.4% implied return)
Oshkosh (NYSE: OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.
Why Does OSK Fall Short?
- Backlog has dropped by 4.7% on average over the past two years, suggesting it’s losing orders as competition picks up
- Gross margin of 16.3% reflects its high production costs
- Earnings per share have contracted by 6.8% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Oshkosh is trading at $122.61 per share, or 10.4x forward P/E. Dive into our free research report to see why there are better opportunities than OSK.
Fastly (FSLY)
Consensus Price Target: $24.11 (42.3% implied return)
Taking its name from the core advantage it delivers to customers, Fastly (NASDAQ: FSLY) operates an edge cloud platform that processes, secures, and delivers web content as close to end users as possible, enabling faster digital experiences.
Why Are We Hesitant About FSLY?
- Net revenue retention rate of 107% trails the industry benchmark of 110%+ and shows it has a tough time increasing customer spending
- Gross margin of 59.4% reflects its high servicing costs
- Suboptimal cost structure is highlighted by its history of operating margin losses
Fastly’s stock price of $16.95 implies a valuation ratio of 3.7x forward price-to-sales. Read our free research report to see why you should think twice about including FSLY in your portfolio.
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