When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.
Two Stocks to Sell:
Bread Financial (BFH)
Consensus Price Target: $113.53 (5.1% implied return)
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE:BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Are We Cautious About BFH?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Earnings per share fell by 6.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
At $108.07 per share, Bread Financial trades at 8.7x forward P/E. Check out our free in-depth research report to learn more about why BFH doesn’t pass our bar.
U.S. Bancorp (USB)
Consensus Price Target: $70.32 (9.2% implied return)
With roots dating back to 1863 and a presence across 26 states primarily in the Midwest and West, U.S. Bancorp (NYSE:USB) is one of America's largest banks providing lending, deposit services, wealth management, payment processing, and merchant services to individuals and businesses.
Why Does USB Give Us Pause?
- The company has faced growth challenges as its 6.4% annual net interest income increases over the last five years fell short of other banking companies
- Net interest margin of 2.7% reflects its high servicing and capital costs
- Performance over the past five years shows its incremental sales were less profitable, as its 1.4% annual earnings per share growth trailed its revenue gains
U.S. Bancorp is trading at $64.41 per share, or 1.6x forward P/B. Read our free research report to see why you should think twice about including USB in your portfolio.
One Stock to Buy:
Snowflake (SNOW)
Consensus Price Target: $303.95 (-9.1% implied return)
Named after the unique architecture of its data warehouse which resembles a snowflake pattern, Snowflake (NYSE:SNOW) provides a cloud-based data platform that enables organizations to consolidate, analyze, and share data across multiple cloud providers.
Why Is SNOW a Good Business?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 31.4% over the last year
- Notable projected revenue growth of 28.5% for the next 12 months hints at market share gains
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Snowflake’s stock price of $334.36 implies a valuation ratio of 17.9x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
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