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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.
Two Stocks to Sell:
Columbia Sportswear (COLM)
Consensus Price Target: $66.50 (5.4% implied return)
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Do We Pass on COLM?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Diminishing returns on capital suggest its earlier profit pools are drying up
Columbia Sportswear’s stock price of $63.11 implies a valuation ratio of 17.7x forward P/E. Check out our free in-depth research report to learn more about why COLM doesn’t pass our bar.
Parker-Hannifin (PH)
Consensus Price Target: $712.35 (6% implied return)
Founded in 1917, Parker Hannifin (NYSE: PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Does PH Fall Short?
- 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
- Estimated sales growth of 2% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin dropped by 2.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $671.75 per share, Parker-Hannifin trades at 23.6x forward P/E. To fully understand why you should be careful with PH, check out our full research report (it’s free).
One Stock to Buy:
Hims & Hers Health (HIMS)
Consensus Price Target: $47.87 (-16.2% implied return)
Originally launched with a focus on stigmatized conditions like hair loss and sexual health, Hims & Hers Health (NYSE: HIMS) operates a consumer-focused telehealth platform that connects patients with healthcare providers for prescriptions and wellness products.
Why Are We Backing HIMS?
- Business is winning new contracts that can potentially increase in value as its customer base averaged 48.6% growth over the past two years
- Earnings per share grew by 37% annually over the last four years and trumped its peers
- Free cash flow margin jumped by 23.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Hims & Hers Health is trading at $57.16 per share, or 43.6x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
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