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.

Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. Keeping that in mind, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.

Darden (DRI)

Consensus Price Target: $230.05 (9.9% implied return)

Founded in 1968 as Red Lobster, Darden (NYSE: DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.

Why Are We Hesitant About DRI?

1. Sizable revenue base leads to growth challenges as its 6% annual revenue increases over the last six years fell short of other restaurant companies
2. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
3. Lacking pricing power results in an inferior gross margin of 21.5% that must be offset by turning more tables

Darden is trading at $209.34 per share, or 19.4x forward P/E. To fully understand why you should be careful with DRI, check out our full research report (it’s free).

Brookdale (BKD)

Consensus Price Target: $7.70 (-2.9% implied return)

With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE: BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.

Why Do We Think BKD Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last five years
2. Underwhelming -0.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $7.93 per share, Brookdale trades at 4.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including BKD in your portfolio.

Apollo Commercial Real Estate Finance (ARI)

Consensus Price Target: $10.05 (-0.2% implied return)

Launched during the aftermath of the 2008 financial crisis to capitalize on disruption in commercial real estate lending, Apollo Commercial Real Estate Finance (NYSE: ARI) is a real estate investment trust that originates and invests in commercial mortgage loans and other real estate debt.

Why Should You Sell ARI?

1. Annual sales declines of 6.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Sales were less profitable over the last five years as its earnings per share fell by 15.1% annually, worse than its revenue declines
3. Annual tangible book value per share declines of 3% for the past five years show its capital management struggled during this cycle

Apollo Commercial Real Estate Finance’s stock price of $10.07 implies a valuation ratio of 0.8x forward P/B. If you’re considering ARI for your portfolio, see our FREE research report to learn more.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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