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 are three stocks where Wall Street’s estimates seem disconnected from reality and some better opportunities to consider.
Magnachip (MX)
Consensus Price Target: $4.75 (67.5% implied return)
With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE: MX) is a provider of analog and mixed-signal semiconductors.
Why Do We Steer Clear of MX?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 16.2% annually over the last five years
- Earnings per share have contracted by 16.8% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- Cash burn has widened over the last five years, making us question whether it can reliably generate shareholder value
At $2.84 per share, Magnachip trades at 0.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MX.
Post (POST)
Consensus Price Target: $125.50 (25.1% implied return)
Founded in 1895, Post (NYSE: POST) is a packaged food company known for its namesake breakfast cereal and healthier-for-you snacks.
Why Is POST Not Exciting?
- Shrinking unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Estimated sales growth of 3.4% for the next 12 months implies demand will slow from its three-year trend
- ROIC of 5.7% reflects management’s challenges in identifying attractive investment opportunities
Post’s stock price of $100.32 implies a valuation ratio of 14.3x forward P/E. Read our free research report to see why you should think twice about including POST in your portfolio.
Corebridge Financial (CRBG)
Consensus Price Target: $38.15 (25.1% implied return)
Spun off from insurance giant AIG in 2022 to focus on the growing retirement market, Corebridge Financial (NYSE: CRBG) provides retirement solutions, annuities, life insurance, and institutional risk management products in the United States.
Why Are We Cautious About CRBG?
- Insurance policy sales contracted this cycle as net premiums earned decreased by 15.4% annually over the last two years
- Expenses have increased as a percentage of revenue over the last four years as its pre-tax profit margin fell by 22.4 percentage points
- High debt-to-equity ratio of 1.1× shows the firm carries too much debt relative to shareholder equity, increasing bankruptcy risk
Corebridge Financial is trading at $30.51 per share, or 1.2x forward P/B. Check out our free in-depth research report to learn more about why CRBG doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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