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 poised to prove Wall Street wrong and two facing legitimate challenges.
Two Stocks to Sell:
Dropbox (DBX)
Consensus Price Target: $25.50 (5.3% implied return)
Originally named after the founders' tendency to "drop" files into a shared folder, Dropbox (NASDAQ: DBX) provides a content collaboration platform that helps individuals and teams store, organize, share, and work on files from anywhere.
Why Do We Pass on DBX?
- Billings have dropped by 1.1% over the last year, suggesting it might have to lower prices to stimulate growth
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Operating margin improved by 8.3 percentage points over the last year as it eliminated redundant costs
Dropbox is trading at $24.22 per share, or 2.5x forward price-to-sales. If you’re considering DBX for your portfolio, see our FREE research report to learn more.
Rush Enterprises (RUSHA)
Consensus Price Target: $78.67 (6.7% implied return)
Headquartered in Texas, Rush Enterprises (NASDAQ: RUSH.A) provides truck-related services and solutions, including sales, leasing, parts, and maintenance for commercial vehicles.
Why Does RUSHA Fall Short?
- Annual sales declines of 3.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Gross margin of 20.3% reflects its high production costs
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
At $73.71 per share, Rush Enterprises trades at 19.9x forward P/E. Dive into our free research report to see why there are better opportunities than RUSHA.
One Stock to Watch:
Helmerich & Payne (HP)
Consensus Price Target: $38.40 (6.4% implied return)
Operating the largest fleet of super-spec rigs in North America with technology that can drill horizontal wells over two miles long, Helmerich & Payne (NYSE: HP) provides drilling rigs and crews to oil and gas companies that need wells drilled to extract hydrocarbons from underground.
Why Is HP Interesting?
- Market share has increased this cycle as its 25.4% annual revenue growth over the last five years was exceptional
- Revenue base of $4.09 billion gives it economies of scale and some negotiating power with suppliers
- EBITDA margin improvement of 14.5 percentage points over the last five years demonstrates its ability to scale efficiently
Helmerich & Payne’s stock price of $36.10 implies a valuation ratio of 75x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
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