3 of Wall Street's Favorite Stocks with Red Flags

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’s estimates seem disconnected from reality and some better opportunities to consider.

Reynolds (REYN)

Consensus Price Target: $31.22 (18.7% implied return)

Best known for its aluminum foil, Reynolds (NASDAQ:REYN) is a household products company whose products focus on food storage, cooking, and waste.

Why Should You Sell REYN?

1. Shrinking unit sales over the past two years suggest it might have to lower prices to stimulate growth
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 4.4 percentage points

At $23.97 per share, Reynolds trades at 13.7x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than REYN.

Bally's (BALY)

Consensus Price Target: $18.06 (3.1% implied return)

Headquartered in Providence, Rhode Island, Bally's Corporation (NYSE:BALY) is a diversified global casino-entertainment company that owns and manages casinos, resorts, and online gaming platforms.

Why Should You Dump BALY?

1. Lackluster 4.2% annual revenue growth over the last two years indicates the company is losing ground to competitors
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Bally’s stock price of $15.09 implies a valuation ratio of 1.2x forward EV-to-EBITDA. To fully understand why you should be careful with BALY, check out our full research report (it’s free).

Malibu Boats (MBUU)

Consensus Price Target: $45.63 (47.6% implied return)

Founded in California in 1982, Malibu Boats (NASDAQ:MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.

Why Do We Think MBUU Will Underperform?

1. Performance surrounding its boats sold has lagged its peers
2. Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 29% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Malibu Boats is trading at $26.91 per share, or 8.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why MBUU doesn’t pass our bar.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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.