Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.
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 two stocks where Wall Street’s pessimism is creating a buying opportunity and one where the skepticism is well-placed.
One Stock to Sell:
Disney (DIS)
Consensus Price Target: $123.91 (9.8% implied return)
Founded by brothers Walt and Roy, Disney (NYSE: DIS) is a multinational entertainment conglomerate, renowned for its theme parks, movies, television networks, and merchandise.
Why Do We Pass on DIS?
- Scale is a double-edged sword because it limits the company's growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.7% for the last five years
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 5.3 percentage points over the next year
- ROIC of 5.7% reflects management’s challenges in identifying attractive investment opportunities
Disney is trading at $112.81 per share, or 20.5x forward P/E. If you’re considering DIS for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Yum! Brands (YUM)
Consensus Price Target: $158.39 (9.5% implied return)
Spun off as an independent company from PepsiCo, Yum! Brands (NYSE: YUM) is a multinational corporation that owns KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill.
Why Are We Fans of YUM?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Excellent operating margin of 32.1% highlights the efficiency of its business model
- Strong free cash flow margin of 18.9% enables it to reinvest or return capital consistently
Yum! Brands’s stock price of $144.63 implies a valuation ratio of 23.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Nextracker (NXT)
Consensus Price Target: $60.79 (10.5% implied return)
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dabhi solar farm project, Nextracker (NASDAQ: NXT) is a provider of solar tracker systems that help solar panels follow the sun.
Why Is NXT a Good Business?
- Demand is greater than supply as the company’s 46.5% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
- Free cash flow margin increased by 13.6 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Improving returns on capital reflect management’s ability to monetize investments
At $55.01 per share, Nextracker trades at 14.2x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
