1 of Wall Street’s Favorite Stocks on Our Buy List and 2 Facing Challenges
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. Keeping that in mind, here is one stock where Wall Street’s excitement appears well-founded and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell: MillerKnoll (MLKN)
Consensus Price Target: $35 (42.9% implied return)
Created through the 2021 merger of industry icons Herman Miller and Knoll, MillerKnoll (NASDAQ:MLKN) designs, manufactures, and distributes interior furnishings for offices, healthcare facilities, educational settings, and homes worldwide.
Why Does MLKN Fall Short?
2.9% annual revenue growth over the last two years was slower than its business services peers
Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 11% annually
Low free cash flow margin of 2.2% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
MillerKnoll is trading at $24.49 per share, or 11.8x forward P/E. To fully understand why you should be careful with MLKN, check out our full research report (it’s free).
QuidelOrtho (QDEL)
Consensus Price Target: $12 (-2.6% implied return)
Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ:QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.
Why Do We Think QDEL Will Underperform?
Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $12.32 per share, QuidelOrtho trades at 18.1x forward P/E. Dive into our free research report to see why there are better opportunities than QDEL.
One Stock to Buy: Planet Labs (PL)
Consensus Price Target: $40.10 (65.5% implied return)