3 of Wall Street’s Favorite Stocks Skating on Thin Ice

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.

Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.

Analog Devices (ADI)

Consensus Price Target: $250.40 (25.8% implied return)

Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ:ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.

Why Are We Cautious About ADI?

1. Sales tumbled by 13.8% annually over the last two years, showing market trends are working against its favor during this cycle
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 8.1 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up

At $194.88 per share, Analog Devices trades at 25.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ADI.

AMC Networks (AMCX)

Consensus Price Target: $10.29 (26.1% implied return)

Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ:AMCX) is a broadcaster producing a diverse range of television shows and movies.

Why Are We Out on AMCX?

1. Products and services aren't resonating with the market as its revenue declined by 4.6% annually over the last five years
2. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 3.6 percentage points over the next year
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

AMC Networks is trading at $6.57 per share, or 1.9x forward price-to-earnings. To fully understand why you should be careful with AMCX, check out our full research report (it’s free).

GXO Logistics (GXO)

Consensus Price Target: $63.93 (40.3% implied return)

With notable customers such as Nike and Apple, GXO (NYSE:GXO) manages outsourced supply chains and warehousing for various companies.

Why Does GXO Give Us Pause?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Flat earnings per share over the last two years underperformed the sector average
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

GXO Logistics’s stock price of $35.63 implies a valuation ratio of 11.8x forward price-to-earnings. Read our free research report to see why you should think twice about including GXO in your portfolio.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.