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 where the skepticism is well-placed and some better opportunities to consider.

3M (MMM)

Consensus Price Target: $174.31 (5.6% implied return)

Producers of the first asthma inhaler, 3M Company (NYSE: MMM) is a global conglomerate known for products in industries like healthcare, safety, electronics, and consumer goods.

Why Do We Pass on MMM?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
3. Earnings per share have contracted by 1.5% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance

3M’s stock price of $165 implies a valuation ratio of 19.6x forward P/E. Check out our free in-depth research report to learn more about why MMM doesn’t pass our bar.

IBM (IBM)

Consensus Price Target: $287.09 (-6.7% implied return)

With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE: IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.

Why Are We Cautious About IBM?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 1.3% over the last five years was below our standards for the business services sector
2. Earnings per share lagged its peers over the last five years as they only grew by 4.2% annually
3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $307.60 per share, IBM trades at 25.6x forward P/E. Dive into our free research report to see why there are better opportunities than IBM.

Westamerica Bancorporation (WABC)

Consensus Price Target: $53 (11% implied return)

Founded in 1884 and serving communities from Mendocino County in the north to Kern County in the south, Westamerica Bancorporation (NASDAQ: WABC) provides banking services to individuals and small businesses throughout Northern and Central California.

Why Are We Hesitant About WABC?

1. Muted 6.2% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
2. Net interest income is projected to tank by 11% over the next 12 months as demand evaporates
3. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 46.7 basis points (100 basis points = 1 percentage point)

Westamerica Bancorporation is trading at $47.75 per share, or 1.3x forward P/B. If you’re considering WABC for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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