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 are three stocks where the skepticism is well-placed and some better opportunities to consider.
Williams-Sonoma (WSM)
Consensus Price Target: $215.15 (-13.1% implied return)
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE:WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Why Do We Think Twice About WSM?
- Products have few die-hard fans as sales have declined by 2.6% annually over the last three years
- Store closures and poor same-store sales reveal weak demand and a push toward operational efficiency
- Comparable store sales rose by 2% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
Williams-Sonoma’s stock price of $247.50 implies a valuation ratio of 26x forward P/E. To fully understand why you should be careful with WSM, check out our full research report (it’s free).
WESCO (WCC)
Consensus Price Target: $397.09 (6.8% implied return)
Based in Pittsburgh, WESCO (NYSE:WCC) provides electrical, industrial, and communications products and augments them with services such as supply chain management.
Why Does WCC Fall Short?
- The company has faced growth challenges as its 6.8% annual revenue increases over the last two years fell short of other industrials companies
- High input costs result in an inferior gross margin of 21.5% that must be offset through higher volumes
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.5% for the last five years
At $371.79 per share, WESCO trades at 20.5x forward P/E. If you’re considering WCC for your portfolio, see our FREE research report to learn more.
Commerce Bancshares (CBSH)
Consensus Price Target: $64.56 (9.2% implied return)
Founded in 1865 during the post-Civil War economic boom, Commerce Bancshares (NASDAQGS:CBSH) is a Midwest-focused bank holding company that provides retail, commercial, and wealth management services to individuals and businesses.
Why Is CBSH Not Exciting?
- Annual revenue growth of 6.2% over the last five years was below our standards for the banking sector
- Net interest income trends were unexciting over the last five years as its 7% annual growth was below the typical banking firm
- Incremental sales over the last five years were less profitable as its 4.3% annual earnings per share growth lagged its revenue gains
Commerce Bancshares is trading at $59.12 per share, or 1.9x forward P/B. Read our free research report to see why you should think twice about including CBSH in your portfolio.
Stocks We Like More
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