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.

Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.

Revolve (RVLV)

Consensus Price Target: $22.93 (7.8% implied return)

Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NASDAQ: RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.

Why Do We Pass on RVLV?

1. Competition may be pulling attention away from its platform as its 7.4% average growth in active customers was choppy
2. Demand has fallen off a cliff over the last two years as its average revenue per buyer fell by 4% annually while it struggled to expand its customer base
3. Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 18.5% annually

Revolve is trading at $21.27 per share, or 19.6x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than RVLV.

GoPro (GPRO)

Consensus Price Target: $0.99 (-25.9% implied return)

Known for sponsoring extreme athletes, GoPro (NASDAQ: GPRO) is a camera company known for its POV videos and editing software.

Why Should You Dump GPRO?

1. Sales tumbled by 6.1% annually over the last five years, showing consumer trends are working against its favor
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

GoPro’s stock price of $1.33 implies a valuation ratio of 20x forward P/E. Read our free research report to see why you should think twice about including GPRO in your portfolio.

PepsiCo (PEP)

Consensus Price Target: $152.65 (6.1% implied return)

With a history that goes back more than a century, PepsiCo (NASDAQ: PEP) is a household name in food and beverages today and best known for its flagship soda.

Why Are We Cautious About PEP?

1. Shrinking unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
2. Estimated sales growth of 3.1% for the next 12 months is soft and implies weaker demand
3. Efficiency has decreased over the last year as its operating margin fell by 2.1 percentage points

At $143.92 per share, PepsiCo trades at 17.8x forward P/E. Check out our free in-depth research report to learn more about why PEP doesn’t pass our bar.

Stocks We Like More

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