3 of Wall Street's Favorite Stocks with Mounting Challenges

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.

Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. Keeping that in mind, here are three stocks where Wall Street’s enthusiasm may be misplaced and some other investments worth exploring instead.

Gap (GAP)

Consensus Price Target: $25.88 (17.4% implied return)

Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE:GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.

Why Do We Avoid GAP?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Projected sales for the next 12 months are flat and suggest demand will be subdued
3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $22.05 per share, Gap trades at 10.1x forward P/E. To fully understand why you should be careful with GAP, check out our full research report (it’s free).

Middleby (MIDD)

Consensus Price Target: $176.86 (31.8% implied return)

Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE:MIDD) is a food service and equipment manufacturer.

Why Do We Think MIDD Will Underperform?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2.3% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3 percentage points

Middleby is trading at $134.17 per share, or 13.3x forward P/E. Read our free research report to see why you should think twice about including MIDD in your portfolio.

TaskUs (TASK)

Consensus Price Target: $18.50 (23.3% implied return)

Starting as a virtual assistant service in 2008 before evolving into a global digital services provider, TaskUs (NASDAQ:TASK) provides outsourced digital services including customer experience management, content moderation, and AI data services to innovative technology companies.

Why Does TASK Fall Short?

1. Annual revenue growth of 1.8% over the last two years was below our standards for the business services sector
2. Earnings per share have contracted by 3.9% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. ROIC of 5.4% reflects management’s challenges in identifying attractive investment opportunities

TaskUs’s stock price of $15 implies a valuation ratio of 10.1x forward P/E. Dive into our free research report to see why there are better opportunities than TASK.

Stocks That Overcame Trump’s 2018 Tariffs

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.