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.
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. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.
Two Stocks to Sell:
HP (HPQ)
Consensus Price Target: $22.91 (-1.7% implied return)
Born from the legendary Silicon Valley garage startup founded by Bill Hewlett and Dave Packard in 1939, HP (NYSE: HPQ) designs and sells personal computers, printers, and related technology products and services to consumers, businesses, and enterprises worldwide.
Why Do We Pass on HPQ?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.2% annually over the last five years
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable
HP is trading at $23.31 per share, or 8.6x forward P/E. Read our free research report to see why you should think twice about including HPQ in your portfolio.
Archer-Daniels-Midland (ADM)
Consensus Price Target: $74.10 (-0.9% implied return)
Transforming crops from the world's most productive agricultural regions into everyday essentials, Archer-Daniels-Midland (NYSE: ADM) processes and transports agricultural commodities like grains and oilseeds while manufacturing ingredients for food, beverages, feed, and industrial applications.
Why Does ADM Give Us Pause?
- Products aren’t resonating with the market as its revenue declined by 7.5% annually over the last three years
- Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 6.3%
- Earnings per share have dipped by 24.7% annually over the past three years, which is concerning because stock prices follow EPS over the long term
Archer-Daniels-Midland’s stock price of $74.79 implies a valuation ratio of 14.3x forward P/E. Check out our free in-depth research report to learn more about why ADM doesn’t pass our bar.
One Stock to Buy:
GE Aerospace (GE)
Consensus Price Target: $350.95 (-4.1% implied return)
One of the original 12 companies on the Dow Jones Industrial Average, General Electric (NYSE: GE) is a multinational conglomerate providing technologies for various sectors including aviation, power, renewable energy, and healthcare.
Why Are We Bullish on GE?
- Market share has increased this cycle as its 16.7% annual revenue growth over the last two years was exceptional
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 41.9% exceeded its revenue gains over the last two years
- Robust free cash flow margin of 17.2% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute
At $365.83 per share, GE Aerospace trades at 46x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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