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 are three stocks facing legitimate challenges and some alternatives worth exploring instead.
The Honest Company (HNST)
Consensus Price Target: $3.50 (0.4% implied return)
Co-founded by actress Jessica Alba, The Honest Company (NASDAQ: HNST) sells diapers and wipes, skin care products, and household cleaning products.
Why Should You Dump HNST?
- Lackluster 5.8% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Subscale operations are evident in its revenue base of $371.3 million, meaning it has fewer distribution channels than its larger rivals
- Push for growth has led to negative returns on capital, signaling value destruction
At $3.49 per share, The Honest Company trades at 36.6x forward P/E. Read our free research report to see why you should think twice about including HNST in your portfolio.
Hertz (HTZ)
Consensus Price Target: $4.43 (-32.9% implied return)
Started with a dozen Model T Fords, Hertz (NASDAQ: HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.
Why Is HTZ Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.7% annually over the last two years
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Hertz is trading at $6.60 per share, or 132.5x forward EV-to-EBITDA. If you’re considering HTZ for your portfolio, see our FREE research report to learn more.
Lennar (LEN)
Consensus Price Target: $94 (-0.5% implied return)
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Should You Sell LEN?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 11.4% decline in its backlog
- Free cash flow margin shrank by 7.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Lennar’s stock price of $94.48 implies a valuation ratio of 15.4x forward P/E. Dive into our free research report to see why there are better opportunities than LEN.
High-Quality Stocks for All Market Conditions
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