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3 of Wall Street’s Favorite Stocks We’re Skeptical Of

AMPL Cover Image

Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.

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

Amplitude (AMPL)

Consensus Price Target: $15.67 (56.7% implied return)

Born from the realization that companies were flying blind when it came to understanding user behavior in their digital products, Amplitude (NASDAQ: AMPL) provides a digital analytics platform that helps businesses understand how people use their digital products to improve user experiences and drive revenue growth.

Why Do We Steer Clear of AMPL?

  1. Average billings growth of 9.9% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
  2. Below-average net revenue retention rate of 100% suggests it has some trouble expanding within existing accounts
  3. Operating margin didn’t move over the last year, showing it couldn’t increase its efficiency

At $10 per share, Amplitude trades at 3.7x forward price-to-sales. To fully understand why you should be careful with AMPL, check out our full research report (it’s free for active Edge members).

Hormel Foods (HRL)

Consensus Price Target: $28.75 (21.2% implied return)

Best known for its SPAM brand, Hormel (NYSE: HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.

Why Do We Pass on HRL?

  1. Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
  2. Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 16.6%
  3. Sales were less profitable over the last three years as its earnings per share fell by 7% annually, worse than its revenue declines

Hormel Foods is trading at $23.73 per share, or 16x forward P/E. Check out our free in-depth research report to learn more about why HRL doesn’t pass our bar.

Boeing (BA)

Consensus Price Target: $252.95 (18.1% implied return)

One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE: BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.

Why Is BA Risky?

  1. Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
  2. Cash burn makes us question whether it can achieve sustainable long-term growth
  3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Boeing’s stock price of $214.17 implies a valuation ratio of 28.1x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BA.

High-Quality Stocks for All Market Conditions

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