When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as 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.

Tapestry (TPR)

Consensus Price Target: $128.33 (-3.9% implied return)

Originally founded as Coach, Tapestry (NYSE: TPR) is an American fashion conglomerate with a portfolio of luxury brands offering high-quality accessories and fashion products.

Why Do We Pass on TPR?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Poor expense management has led to an operating margin of 11.7% that is below the industry average
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $133.48 per share, Tapestry trades at 23x forward P/E. To fully understand why you should be careful with TPR, check out our full research report (it’s free for active Edge members).

Marriott Vacations (VAC)

Consensus Price Target: $64 (2.3% implied return)

Spun off from Marriott International in 1984, Marriott Vacations (NYSE: VAC) is a vacation company providing leisure experiences for travelers around the world.

Why Do We Think VAC Will Underperform?

1. Demand for its offerings was relatively low as its number of conducted tours has underwhelmed
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Marriott Vacations’s stock price of $62.56 implies a valuation ratio of 8.5x forward P/E. If you’re considering VAC for your portfolio, see our FREE research report to learn more.

Taboola (TBLA)

Consensus Price Target: $4.80 (11.8% implied return)

Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.

Why Are We Hesitant About TBLA?

1. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 1.3 percentage points
2. Earnings per share have dipped by 25.3% annually over the past four years, which is concerning because stock prices follow EPS over the long term
3. Push for growth has led to negative returns on capital, signaling value destruction

Taboola is trading at $4.30 per share, or 10x forward P/E. Read our free research report to see why you should think twice about including TBLA in your portfolio.

Stocks We Like More

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