1 of Wall Street’s Favorite Stock on Our Watchlist and 2 to Think Twice About

The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where its enthusiasm might be excessive.

Consensus Price Target: $8.73 (62.3% implied return)

Founded by consignment store aficionado Julie Wainwright, The RealReal (NASDAQ: REAL) is an online marketplace for buying and selling secondhand luxury goods.

Why Are We Hesitant About REAL?

Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 5.5% annually

Cash-burning history makes us doubt the long-term viability of its business model

Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $5.38 per share, The RealReal trades at 21.4x forward EV/EBITDA. Check out our free in-depth research report to learn more about why REAL doesn’t pass our bar.

Consensus Price Target: $30.35 (32.9% implied return)

Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ:PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.

Why Are We Cautious About PRVA?

Revenue base of $1.80 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale

Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Negative returns on capital show that some of its growth strategies have backfired

Privia Health is trading at $22.83 per share, or 26.8x forward P/E. Dive into our free research report to see why there are better opportunities than PRVA.

Consensus Price Target: $19 (35.7% implied return)

Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE:ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.