1 Unpopular Stock that Deserves Some Love and 2 to Steer Clear Of
In This Article:
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.
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 facing legitimate challenges.
Two Stocks to Sell:
Rocket Lab (RKLB)
Consensus Price Target: $27.42 (-5.1% implied return)
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ:RKLB) offers rockets designed for launching small satellites.
Why Does RKLB Fall Short?
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Historically negative EPS casts doubt for cautious investors and clouds its long-term earnings prospects
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Negative free cash flow raises questions about the return timeline for its investments
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Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Rocket Lab’s stock price of $28.90 implies a valuation ratio of 23.3x forward price-to-sales. To fully understand why you should be careful with RKLB, check out our full research report (it’s free).
Equifax (EFX)
Consensus Price Target: $286.47 (6.8% implied return)
Holding detailed financial records on over 800 million consumers worldwide and dating back to 1899, Equifax (NYSE:EFX) is a global data analytics company that collects, analyzes, and sells consumer and business credit information to lenders, employers, and other businesses.
Why Is EFX Not Exciting?
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Efficiency has decreased over the last five years as its adjusted operating margin fell by 6.8 percentage points
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Incremental sales over the last two years were less profitable as its 4% annual earnings per share growth lagged its revenue gains
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Underwhelming 10.6% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
Equifax is trading at $268.31 per share, or 33.9x forward P/E. If you’re considering EFX for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Cloudflare (NET)
Consensus Price Target: $148.01 (-18.1% implied return)
Founded by two grad students of Harvard Business School, Cloudflare (NYSE:NET) is a software-as-a-service platform that helps improve the security, reliability, and loading times of internet applications.
Why Will NET Outperform?
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Winning new contracts that can potentially increase in value as its billings growth has averaged 27.9% over the last year
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Notable projected revenue growth of 25.6% for the next 12 months hints at market share gains
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Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently