Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. Keeping that in mind, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
Churchill Downs (CHDN)
Consensus Price Target: $134.75 (54% implied return)
Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ: CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.
Why Should You Sell CHDN?
- Sales trends were unexciting over the last two years as its 9% annual growth was below the typical consumer discretionary company
- Free cash flow margin is expected to increase by 1.2 percentage points next year, suggesting the company will have more capital to invest or return to shareholders
- Returns on capital are growing as management invests in more worthwhile ventures
Churchill Downs’s stock price of $87.50 implies a valuation ratio of 13.4x forward P/E. To fully understand why you should be careful with CHDN, check out our full research report (it’s free).
Sixth Street Specialty Lending (TSLX)
Consensus Price Target: $22.09 (22.4% implied return)
Originally launched as TPG Specialty Lending before rebranding in 2020, Sixth Street Specialty Lending (NYSE: TSLX) is a business development company that provides customized financing solutions to middle-market companies across various industries.
Why Do We Think TSLX Will Underperform?
- Sales trends were unexciting over the last two years as its 1.2% annual growth was below the typical financials company
- Flat earnings per share over the last two years lagged its peers
Sixth Street Specialty Lending is trading at $18.05 per share, or 9x forward P/E. Read our free research report to see why you should think twice about including TSLX in your portfolio.
One Stock to Watch:
United Rentals (URI)
Consensus Price Target: $977.54 (26.2% implied return)
Owning the largest rental fleet in the world, United Rentals (NYSE: URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.
Why Are We Fans of URI?
- Impressive 13.5% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Highly efficient business model is illustrated by its impressive 25.9% operating margin, and its operating leverage amplified its profits over the last five years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 19.2% exceeded its revenue gains over the last five years
At $774.48 per share, United Rentals trades at 16.5x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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