3 of Wall Street's Favorite Stocks We Keep Off Our Radar

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.

Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. That said, here are three stocks where Wall Street’s estimates seem disconnected from reality and some better opportunities to consider.

Akamai Technologies (AKAM)

Consensus Price Target: $95.20 (20.8% implied return)

With a massive distributed network spanning 4,100+ points of presence in nearly 130 countries, Akamai Technologies (NASDAQ:AKAM) provides a global distributed cloud platform that helps businesses deliver, secure, and optimize their digital experiences online.

Why Do We Pass on AKAM?

1. Sales trends were unexciting over the last three years as its 4.6% annual growth was well below the typical software company
2. Gross margin of 59.1% is way below its competitors, leaving less money to invest in areas like marketing and R&D
3. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment

Akamai Technologies is trading at $78.80 per share, or 2.7x forward price-to-sales. Check out our free in-depth research report to learn more about why AKAM doesn’t pass our bar.

Calavo (CVGW)

Consensus Price Target: $35 (28.3% implied return)

A trailblazer in the avocado industry, Calavo Growers (NASDAQ:CVGW) is a pioneering California-based provider of high-quality avocados and other fresh food products.

Why Should You Dump CVGW?

1. Products have few die-hard fans as sales have declined by 15.8% annually over the last three years
2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
3. Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 10.5% that must be offset through higher volumes

At $27.28 per share, Calavo trades at 14.3x forward P/E. Read our free research report to see why you should think twice about including CVGW in your portfolio.

CDW (CDW)

Consensus Price Target: $206.80 (24.7% implied return)

Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW (NASDAQ:CDW) is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.

Why Do We Steer Clear of CDW?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.1% annually over the last two years
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.9%
3. Flat earnings per share over the last two years underperformed the sector average

CDW’s stock price of $165.87 implies a valuation ratio of 16.6x forward P/E. Dive into our free research report to see why there are better opportunities than CDW.

Stocks We Like More

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