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.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. That said, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
Take-Two (TTWO)
Consensus Price Target: $202.11 (0.2% implied return)
Best known for its Grand Theft Auto and NBA 2K franchises, Take Two (NASDAQ: TTWO) is one of the world’s largest video game publishers.
Why Are We Cautious About TTWO?
- EBITDA margin fell by 13.1 percentage points over the last few years as it prioritized growth over profits
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 88.8% annually
- Increased cash burn over the last few years raises questions about the return timeline for its investments
At $218 per share, Take-Two trades at 19.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TTWO doesn’t pass our bar.
Nordstrom (JWN)
Consensus Price Target: $24.08 (-0.9% implied return)
Known for its exceptional customer service that features a ‘no questions asked’ return policy, Nordstrom (NYSE: JWN) is a high-end department store chain.
Why Do We Pass on JWN?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability
- Low returns on capital reflect management’s struggle to allocate funds effectively
Nordstrom’s stock price of $24.21 implies a valuation ratio of 11.6x forward price-to-earnings. To fully understand why you should be careful with JWN, check out our full research report (it’s free).
BJ's (BJ)
Consensus Price Target: $102.16 (0.1% implied return)
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE: BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
Why Does BJ Worry Us?
- 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 9.2% for the last five years
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 18.3% that must be offset through higher volumes
- Subpar operating margin of 3.9% constrains its ability to invest in process improvements or effectively respond to new competitive threats
BJ's is trading at $114.67 per share, or 26.7x forward price-to-earnings. Read our free research report to see why you should think twice about including BJ in your portfolio.
Stocks We Like 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 6 Stocks for this week. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
