The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here are two stocks where Wall Street’s positive outlook is supported by strong fundamentals and one where its enthusiasm might be excessive.
One Stock to Sell:
Avis Budget Group (CAR)
Consensus Price Target: $122.63 (52.1% implied return)
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Do We Think CAR Will Underperform?
- Performance surrounding its available rental days - car rental has lagged its peers
- Earnings per share have contracted by 73.4% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $73.40 per share, Avis Budget Group trades at 6.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than CAR.
Two Stocks to Watch:
Confluent (CFLT)
Consensus Price Target: $33.34 (70.2% implied return)
Started in 2014 by the team of engineers at LinkedIn who originally built it as an internal tool, Confluent (NASDAQ: CFLT) provides infrastructure software for organizations that makes it easy and fast to collect and move large amounts of data between different systems.
Why Are We Fans of CFLT?
- Billings growth has averaged 26.4% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- High switching costs and customer loyalty are evident in its net revenue retention rate of 119%
- Forecasted revenue growth of 20.7% for the next 12 months indicates its momentum over the last three years is sustainable
Confluent’s stock price of $21.50 implies a valuation ratio of 6.1x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Ross Stores (ROST)
Consensus Price Target: $165.75 (10.7% implied return)
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Why Are We Positive On ROST?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.6% over the past two years
- Robust free cash flow margin of 8.2% gives it many options for capital deployment
Ross Stores is trading at $140.48 per share, or 21x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
