Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.
Dayforce (DAY)
Consensus Price Target: $83.17 (41.5% implied return)
Founded in 1992 as Ceridian, an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Dayforce (NYSE: DAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.
Why Is DAY Not Exciting?
- Sales trends were unexciting over the last three years as its 19.8% annual growth was below the typical software company
- Gross margin of 50.7% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Efficiency has decreased over the last year as its operating margin fell by 2.9 percentage points
Dayforce is trading at $53.33 per share, or 4.6x forward price-to-sales. If you’re considering DAY for your portfolio, see our FREE research report to learn more.
Ralph Lauren (RL)
Consensus Price Target: $246.15 (40.5% implied return)
Originally founded as a necktie company, Ralph Lauren (NYSE: RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Does RL Worry Us?
- 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
- Estimated sales growth of 3.7% for the next 12 months is soft and implies weaker demand
- Projected 2.6 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
Ralph Lauren’s stock price of $200.13 implies a valuation ratio of 15.2x forward price-to-earnings. Read our free research report to see why you should think twice about including RL in your portfolio.
Ameresco (AMRC)
Consensus Price Target: $35.90 (134% implied return)
Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE: AMRC) provides energy and renewable energy solutions for various sectors.
Why Are We Wary of AMRC?
- Annual sales declines of 1.5% for the past two years show its products and services struggled to connect with the market during this cycle
- Negative free cash flow raises questions about the return timeline for its investments
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $10.04 per share, Ameresco trades at 6.5x forward price-to-earnings. To fully understand why you should be careful with AMRC, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
