3 Unpopular Stocks We Approach with Caution

Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.

Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. Keeping that in mind, here are three stocks where the skepticism is well-placed and some better opportunities to consider.

Akamai (AKAM)

Consensus Price Target: $157.89 (5.4% 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 Should You Dump AKAM?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 6.8% underwhelmed
2. Gross margin of 58.3% is way below its competitors, leaving less money to invest in areas like marketing and R&D
3. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 25.3 percentage points

Akamai’s stock price of $149.84 implies a valuation ratio of 4.7x forward price-to-sales. To fully understand why you should be careful with AKAM, check out our full research report (it’s free).

Best Buy (BBY)

Consensus Price Target: $77.60 (-0.4% implied return)

With humble beginnings as a stereo equipment seller, Best Buy (NYSE:BBY) now sells a broad selection of consumer electronics, appliances, and home office products.

Why Is BBY Risky?

1. Store closures and disappointing same-store sales suggest demand is sluggish and it’s rightsizing its operations
2. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
3. Gross margin of 22.6% is below its competitors, leaving less money for marketing and promotions

At $77.88 per share, Best Buy trades at 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than BBY.

Insight Enterprises (NSIT)

Consensus Price Target: $103 (-4.8% implied return)

With over 35 years of IT expertise and partnerships with more than 8,000 technology providers, Insight Enterprises (NASDAQ:NSIT) provides end-to-end digital transformation solutions that help businesses modernize their IT infrastructure and maximize the value of technology.

Why Are We Out on NSIT?

1. Flat sales over the last five years suggest it must find different ways to grow during this cycle
2. Estimated sales growth of 1.7% for the next 12 months is soft and implies weaker demand
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 2.1% annually

Insight Enterprises is trading at $108.24 per share, or 8.9x forward P/E. If you’re considering NSIT for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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