Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
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 poised to prove Wall Street wrong and two facing legitimate challenges.
Two Stocks to Sell:
Red Rock Resorts (RRR)
Consensus Price Target: $56.77 (4.8% implied return)
Founded in 1976, Red Rock Resorts (NASDAQ: RRR) operates a range of casino resorts and entertainment properties, primarily in the Las Vegas metropolitan area.
Why Do We Steer Clear of RRR?
- 1.7% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Eroding returns on capital suggest its historical profit centers are aging
Red Rock Resorts is trading at $54.15 per share, or 33.1x forward P/E. Read our free research report to see why you should think twice about including RRR in your portfolio.
Resideo (REZI)
Consensus Price Target: $23.33 (-3.1% implied return)
Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.
Why Does REZI Fall Short?
- Muted 4.8% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Estimated sales growth of 4.4% for the next 12 months is soft and implies weaker demand
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $24.07 per share, Resideo trades at 5.9x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than REZI.
One Stock to Buy:
Netflix (NFLX)
Consensus Price Target: $1,330 (11.8% implied return)
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Why Is NFLX a Top Pick?
- Global Streaming Paid Memberships have increased by an average of 14% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin expanded by 19.9 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
Netflix’s stock price of $1,190 implies a valuation ratio of 34.3x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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