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.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two facing legitimate challenges.
Two Stocks to Sell:
Rocket Lab (RKLB)
Consensus Price Target: $27.42 (-5.1% implied return)
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ: RKLB) offers rockets designed for launching small satellites.
Why Does RKLB Fall Short?
- Historically negative EPS casts doubt for cautious investors and clouds its long-term earnings prospects
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Rocket Lab’s stock price of $28.90 implies a valuation ratio of 23.3x forward price-to-sales. Check out our free in-depth research report to learn more about why RKLB doesn’t pass our bar.
Equifax (EFX)
Consensus Price Target: $286.47 (6.8% implied return)
Holding detailed financial records on over 800 million consumers worldwide and dating back to 1899, Equifax (NYSE: EFX) is a global data analytics company that collects, analyzes, and sells consumer and business credit information to lenders, employers, and other businesses.
Why Is EFX Not Exciting?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 6.8 percentage points
- Incremental sales over the last two years were less profitable as its 4% annual earnings per share growth lagged its revenue gains
- Underwhelming 10.6% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
Equifax is trading at $268.31 per share, or 33.9x forward P/E. Dive into our free research report to see why there are better opportunities than EFX.
One Stock to Buy:
Cloudflare (NET)
Consensus Price Target: $148.01 (-18.1% implied return)
Founded by two grad students of Harvard Business School, Cloudflare (NYSE: NET) is a software-as-a-service platform that helps improve the security, reliability, and loading times of internet applications.
Why Will NET Outperform?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 27.9% over the last year
- Notable projected revenue growth of 25.6% for the next 12 months hints at market share gains
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
At $180.80 per share, Cloudflare trades at 27.9x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
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