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 are two stocks where Wall Street’s positive outlook is supported by strong fundamentals and one where analysts may be overlooking some important risks.
Consensus Price Target: $19.14 (46.7% implied return)
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Why Are We Wary of DRVN?
Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
Cash-burning history makes us doubt the long-term viability of its business model
Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging
Driven Brands is trading at $13.05 per share, or 10.2x forward P/E. Check out our free in-depth research report to learn more about why DRVN doesn’t pass our bar.
Consensus Price Target: $159.70 (21.5% implied return)
Starting with just three people selling snowboards online in 2004, Shopify (NASDAQ:SHOP) provides a comprehensive platform that enables merchants of all sizes to create, manage and grow their businesses across multiple sales channels.
Why Should You Buy SHOP?
Billings growth has averaged 30.7% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
Shopify’s stock price of $131.43 implies a valuation ratio of 11.2x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Consensus Price Target: $51.13 (39% implied return)
Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.