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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.
Hyatt Hotels (H)
Consensus Price Target: $196.75 (21% implied return)
Founded in 1957, Hyatt Hotels (NYSE:H) is a global hospitality company with a portfolio of 20 premier brands and over 950 properties across 65 countries.
Why Do We Think H Will Underperform?
- Sales trends were unexciting over the last two years as its 3.3% annual growth was below the typical consumer discretionary company
- Low free cash flow margin of 2.8% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Hyatt Hotels is trading at $162.66 per share, or 42.1x forward P/E. To fully understand why you should be careful with H, check out our full research report (it’s free).
Whirlpool (WHR)
Consensus Price Target: $47.92 (63.9% implied return)
Credited with introducing the first automatic washing machine, Whirlpool (NYSE:WHR) is a manufacturer of a variety of home appliances.
Why Is WHR Risky?
- Sales tumbled by 7.3% annually over the last five years, showing market trends are working against it during this cycle
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
At $29.23 per share, Whirlpool trades at 9.2x forward P/E. Read our free research report to see why you should think twice about including WHR in your portfolio.
Jazz Pharmaceuticals (JAZZ)
Consensus Price Target: $294.64 (39.3% implied return)
Originally founded in 2003 and now headquartered in Ireland following a 2012 tax inversion merger, Jazz Pharmaceuticals (NASDAQGS:JAZZ) develops and markets medicines for sleep disorders, epilepsy, and cancer, with a focus on treatments for patients with limited therapeutic options.
Why Are We Hesitant About JAZZ?
- Estimated sales growth of 4.2% for the next 12 months implies demand will slow from its two-year trend
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 2.6 percentage points
- ROIC of 2.7% reflects management’s challenges in identifying attractive investment opportunities
Jazz Pharmaceuticals’s stock price of $211.48 implies a valuation ratio of 9.9x forward P/E. If you’re considering JAZZ for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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