Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like 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 are three stocks where the skepticism is well-placed and some better opportunities to consider.
General Mills (GIS)
Consensus Price Target: $54.80 (8.3% implied return)
Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE: GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.
Why Does GIS Worry Us?
- Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Projected sales decline of 4.2% for the next 12 months points to an even tougher demand environment ahead
- Earnings growth underperformed the sector average over the last three years as its EPS grew by just 2.2% annually
At $50.62 per share, General Mills trades at 12.9x forward P/E. Read our free research report to see why you should think twice about including GIS in your portfolio.
Kontoor Brands (KTB)
Consensus Price Target: $80.40 (-3.8% implied return)
Founded in 2019 after separating from VF Corporation, Kontoor Brands (NYSE: KTB) is a clothing company known for its high-quality denim products.
Why Do We Think Twice About KTB?
- Flat sales over the last two years suggest it must innovate and find new ways to grow
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Kontoor Brands is trading at $83.56 per share, or 15.4x forward P/E. If you’re considering KTB for your portfolio, see our FREE research report to learn more.
Red Rock Resorts (RRR)
Consensus Price Target: $63.46 (3.8% 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 Are We Hesitant About RRR?
- Sales trends were unexciting over the last five years as its 7.1% annual growth was below the typical consumer discretionary company
- Estimated sales growth of 1.7% for the next 12 months implies demand will slow from its two-year trend
- Waning returns on capital imply its previous profit engines are losing steam
Red Rock Resorts’s stock price of $61.14 implies a valuation ratio of 36.9x forward P/E. To fully understand why you should be careful with RRR, check out our full research report (it’s free).
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