Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.

Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.

DraftKings (DKNG)

Consensus Price Target: $36.13 (58% implied return)

Getting its start in daily fantasy sports, DraftKings (NASDAQ: DKNG) is a digital sports entertainment and gaming company.

Why Do We Steer Clear of DKNG?

1. 28.5% annual revenue growth over the last two years was slower than its consumer discretionary peers
2. Poor expense management has led to operating margin losses
3. Free cash flow margin is expected to remain in place over the coming year

DraftKings’s stock price of $22.87 implies a valuation ratio of 22.1x forward P/E. Check out our free in-depth research report to learn more about why DKNG doesn’t pass our bar.

Gates Industrial Corporation (GTES)

Consensus Price Target: $31.67 (40.7% implied return)

Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE: GTES) offers power transmission and fluid transfer equipment for various industries.

Why Are We Wary of GTES?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Anticipated sales growth of 3.8% for the next year implies demand will be shaky
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Gates Industrial Corporation is trading at $22.51 per share, or 13.7x forward P/E. Dive into our free research report to see why there are better opportunities than GTES.

First American Financial (FAF)

Consensus Price Target: $82 (35.2% implied return)

Tracing its roots back to 1889 when California was experiencing its first major real estate boom, First American Financial (NYSE: FAF) provides title insurance, settlement services, and risk solutions for residential and commercial real estate transactions across the United States and internationally.

Why Is FAF Not Exciting?

1. Muted 1% annual revenue growth over the last five years shows its demand lagged behind its insurance peers
2. Insurance offerings faced market headwinds this cycle, reflected in stagnant net premiums earned over the last five years
3. Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 1.8% annually

At $60.67 per share, First American Financial trades at 1x forward P/B. If you’re considering FAF for your portfolio, see our FREE research report to learn more.

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