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.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. That said, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
PENN Entertainment (PENN)
Consensus Price Target: $21.94 (27.2% implied return)
Established in 1982, PENN Entertainment (NASDAQ:PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.
Why Do We Think PENN Will Underperform?
- Lackluster 1.4% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Negative free cash flow raises questions about the return timeline for its investments
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $17.25 per share, PENN Entertainment trades at 17.6x forward P/E. If you’re considering PENN for your portfolio, see our FREE research report to learn more.
3D Systems (DDD)
Consensus Price Target: $3 (27.7% implied return)
Founded by the inventor of stereolithography, 3D Systems (NYSE:DDD) engineers, manufactures, and sells 3D printers and other related products to the aerospace, automotive, healthcare, and consumer goods industries.
Why Is DDD Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.3% annually over the last five years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
3D Systems’s stock price of $2.35 implies a valuation ratio of 1.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than DDD.
One Stock to Buy:
American Superconductor (AMSC)
Consensus Price Target: $66.67 (19.2% implied return)
Founded in 1987, American Superconductor (NASDAQ:AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Are We Bullish on AMSC?
- Annual revenue growth of 49.8% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow turned positive over the last five years, indicating the company has achieved financial self-sustainability
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
American Superconductor is trading at $55.92 per share, or 98x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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