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.
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. That said, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
nLIGHT (LASR)
Consensus Price Target: $75.50 (6.5% implied return)
Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.
Why Is LASR Not Exciting?
- Muted 3.2% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Negative free cash flow raises questions about the return timeline for its investments
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
nLIGHT’s stock price of $70.91 implies a valuation ratio of 216x forward P/E. Dive into our free research report to see why there are better opportunities than LASR.
Carrier Global (CARR)
Consensus Price Target: $74.99 (9.9% implied return)
Founded by the inventor of air conditioning, Carrier Global (NYSE: CARR) manufactures heating, ventilation, air conditioning, and refrigeration products.
Why Is CARR Risky?
- 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
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 6% annually
- Waning returns on capital imply its previous profit engines are losing steam
At $68.21 per share, Carrier Global trades at 24x forward P/E. If you’re considering CARR for your portfolio, see our FREE research report to learn more.
Regions Financial (RF)
Consensus Price Target: $30.69 (8.3% implied return)
Tracing its roots back to 1971 and operating in a region known as the "heart of Dixie," Regions Financial (NYSE: RF) is a financial holding company that provides banking services, wealth management, and specialty financial solutions across the South, Midwest, and Texas.
Why Are We Hesitant About RF?
- 5.2% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 3.2% for the next 12 months implies demand will slow from its five-year trend
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 8.6% annually
Regions Financial is trading at $28.34 per share, or 1.3x forward P/B. Read our free research report to see why you should think twice about including RF in your portfolio.
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