Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. That said, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
Williams-Sonoma (WSM)
Consensus price target: $248.45 (-0.6% implied return)
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE: WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Why Does WSM Fall Short?
- Products have few die-hard fans as sales have declined by 1.1% annually over the last three years
- Store closures are a headwind for growth and suggest it’s rightsizing operations to optimize sales at existing locations
- Earnings per share lagged its peers over the last three years as they only grew by 6.4% annually
Williams-Sonoma’s stock price of $250.04 implies a valuation ratio of 25.5x forward P/E. Check out our free in-depth research report to learn more about why WSM doesn’t pass our bar.
CME Group (CME)
Consensus price target: $316 (3.1% implied return)
Born from the Chicago Mercantile Exchange founded in 1898 as a butter and egg trading venue, CME Group (NASDAQ: CME) operates the world's largest derivatives marketplace where traders can buy and sell futures and options contracts across interest rates, equities, currencies, commodities, and more.
Why Are We Hesitant About CME?
- Sales trends were unexciting over the last two years as its 7.4% annual growth was below the typical financials company
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 9.6% annually
CME Group is trading at $306.45 per share, or 23.6x forward P/E. To fully understand why you should be careful with CME, check out our full research report (it’s free).
Western Union (WU)
Consensus price target: $6.63 (6.8% implied return)
With a history dating back to 1851 when it began as a telegraph company, Western Union (NYSE: WU) is a global money transfer service that enables consumers and businesses to send funds across borders and currencies, typically within minutes.
Why Do We Think WU Will Underperform?
- Annual sales declines of 4.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 5.3% annually over the past five years, which is concerning because stock prices follow EPS over the long term
At $6.21 per share, Western Union trades at 4.5x forward P/E. Read our free research report to see why you should think twice about including WU in your portfolio.
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