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 is one stock poised to prove Wall Street wrong and two facing legitimate challenges.
Two Stocks to Sell:
Victoria's Secret (VSXY)
Consensus Price Target: $91.40 (-2.8% implied return)
Spun off from L Brands in 2020, Victoria’s Secret (NYSE:VSXY) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.
Why Do We Think Twice About VSXY?
- Sales trends were unexciting over the last three years as its 2.6% annual growth was below the typical consumer retail company
- Poor expense management has led to an operating margin of 4.8% that is below the industry average
- Issuance of new shares over the last three years caused its earnings per share to fall by 6% annually while its revenue grew
At $94.03 per share, Victoria's Secret trades at 20.8x forward P/E. Read our free research report to see why you should think twice about including VSXY in your portfolio.
Herc (HRI)
Consensus Price Target: $179.75 (5.1% implied return)
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE:HRI) provides equipment rental and related services to a wide range of industries.
Why Are We Cautious About HRI?
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7 percentage points
- Earnings per share fell by 30.3% annually over the last two years while its revenue grew, partly because it diluted shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Herc’s stock price of $171.07 implies a valuation ratio of 20.6x forward P/E. To fully understand why you should be careful with HRI, check out our full research report (it’s free).
One Stock to Watch:
Allegion (ALLE)
Consensus Price Target: $174.64 (3.7% implied return)
Allegion plc (NYSE:ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Why Does ALLE Stand Out?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 19.8%, and its rise over the last five years was fueled by some leverage on its fixed costs
- Free cash flow margin jumped by 6.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Industry-leading 21.9% return on capital demonstrates management’s skill in finding high-return investments
Allegion is trading at $168.38 per share, or 17.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.