Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
C3.ai (AI)
Consensus Price Target: $8.91 (-7.4% implied return)
Named after the three Cs of its original focus—carbon, cloud computing, and customer relationship management—C3.ai (NYSE: AI) provides enterprise AI software that helps organizations develop, deploy, and operate large-scale artificial intelligence applications across various industries.
Why Do We Pass on AI?
- Customers had second thoughts about committing to its platform over the last year as its billings averaged 11.2% declines
- Gross margin of 43.5% reflects its high servicing costs
- Cash-burning history makes us doubt the long-term viability of its business model
C3.ai is trading at $9.62 per share, or 6.3x forward price-to-sales. If you’re considering AI for your portfolio, see our FREE research report to learn more.
Qualys (QLYS)
Consensus Price Target: $107.39 (6.5% implied return)
Originally developed to address the growing complexity of IT security in the cloud era, Qualys (NASDAQ: QLYS) provides a cloud-based platform that helps organizations identify, manage, and protect their IT assets from cyber threats across on-premises, cloud, and mobile environments.
Why Does QLYS Give Us Pause?
- Average billings growth of 9.1% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 7.7% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 2.5 percentage points over the last year as it scaled and became more efficient
At $100.84 per share, Qualys trades at 5x forward price-to-sales. Check out our free in-depth research report to learn more about why QLYS doesn’t pass our bar.
Scholastic (SCHL)
Consensus Price Target: $41 (0.4% implied return)
Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ: SCHL) is an international company specializing in children's publishing, education, and media services.
Why Do We Steer Clear of SCHL?
- 6.4% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Low free cash flow margin of 13.9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Scholastic’s stock price of $40.85 implies a valuation ratio of 20.3x forward P/E. To fully understand why you should be careful with SCHL, check out our full research report (it’s free).
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
