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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Kontoor Brands (KTB)
Consensus Price Target: $92.40 (9.7% implied return)
Founded in 2019 after separating from VF Corporation, Kontoor Brands (NYSE: KTB) is a clothing company known for its high-quality denim products.
Why Do We Avoid KTB?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Earnings per share lagged its peers over the last five years as they only grew by 7.6% annually
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $84.20 per share, Kontoor Brands trades at 15.3x forward P/E. If you’re considering KTB for your portfolio, see our FREE research report to learn more.
JPMorgan Chase (JPM)
Consensus Price Target: $344.71 (2.8% implied return)
Tracing its roots back to 1799 when its earliest predecessor was founded by Aaron Burr, JPMorgan Chase (NYSE: JPM) is a leading financial services company offering investment banking, consumer banking, commercial banking, and asset management services globally.
Why Does JPM Fall Short?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.2% over the last two years was below our standards for the banking sector
- Net interest margin of 2.5% is well below other banks, signaling its loans aren’t very profitable
- Projected tangible book value per share growth of 9.7% for the next 12 months suggests sluggish capital generation
JPMorgan Chase is trading at $335.35 per share, or 2.5x forward P/B. Dive into our free research report to see why there are better opportunities than JPM.
ProFrac (ACDC)
Consensus Price Target: $4.87 (-2.3% implied return)
Operating one of the largest electric-powered fracturing fleets in North America, ProFrac (NASDAQ: ACDC) provides hydraulic fracturing services that help oil and gas companies extract hydrocarbons from underground shale formations.
Why Are We Cautious About ACDC?
- Gross margin of 32.5% reflects its high production costs and unfavorable asset base
- Expenses have increased as a percentage of revenue over the last five years as its EBITDA margin fell by 8.1 percentage points
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.9% for the last five years
ProFrac’s stock price of $4.99 implies a valuation ratio of 6.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including ACDC in your portfolio.
High-Quality Stocks for All Market Conditions
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