3 of Wall Street's Favorite Stocks We're Skeptical Of

Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here are three stocks where Wall Street’s enthusiasm may be misplaced and some other investments worth exploring instead.

Lithia (LAD)

Consensus Price Target: $388.86 (21.4% implied return)

With a strong presence in the Western US, Lithia Motors (NYSE:LAD) sells a wide range of vehicles, including new and used cars, trucks, SUVs, and luxury vehicles from various manufacturers.

Why Are We Hesitant About LAD?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Gross margin of 15.8% is an output of its commoditized inventory
3. 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Lithia’s stock price of $320.20 implies a valuation ratio of 9.4x forward P/E. If you’re considering LAD for your portfolio, see our FREE research report to learn more.

La-Z-Boy (LZB)

Consensus Price Target: $41 (9% implied return)

The prized possession of every mancave, La-Z-Boy (NYSE:LZB) is a furniture company specializing in recliners, sofas, and seats.

Why Do We Think LZB Will Underperform?

1. Annual sales declines of 2.8% for the past two years show its products and services struggled to connect with the market
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.9%
3. Diminishing returns on capital suggest its earlier profit pools are drying up

La-Z-Boy is trading at $37.60 per share, or 11.4x forward P/E. Check out our free in-depth research report to learn more about why LZB doesn’t pass our bar.

Tutor Perini (TPC)

Consensus Price Target: $75 (26.5% implied return)

Known for constructing the Philadelphia Eagles’ Stadium, Tutor Perini (NYSE:TPC) is a civil and building construction company offering diversified general contracting and design-build services.

Why Do We Avoid TPC?

1. Sales were flat over the last five years, indicating it’s failed to expand this cycle
2. Performance over the past five years was negatively impacted by new share issuances as its earnings per share fell by 32.4% annually while its revenue was flat
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $59.30 per share, Tutor Perini trades at 22.9x forward P/E. Dive into our free research report to see why there are better opportunities than TPC.

High-Quality Stocks for All Market Conditions

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