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. That said, here are two stocks poised to prove Wall Street wrong and one facing legitimate challenges.
One Stock to Sell:
Redfin (RDFN)
Consensus Price Target: $10 (-11.5% implied return)
Founded by a former medical school student, electrical engineer, and Amazon data engineer, Redfin (NASDAQ: RDFN) is a real estate company offering brokerage services through an online platform.
Why Do We Pass on RDFN?
- Demand for its offerings was relatively low as its number of brokerage transactions has underwhelmed
- Earnings per share fell by 9.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- EBITDA losses may force it to accept punitive lending terms or high-cost debt
Redfin’s stock price of $11.30 implies a valuation ratio of 86.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including RDFN in your portfolio.
Two Stocks to Watch:
LegalZoom (LZ)
Consensus Price Target: $9.79 (6% implied return)
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Do We Like LZ?
- Subscription Units are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 289% exceeded its revenue gains over the last three years
- Free cash flow margin expanded by 13.1 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
LegalZoom is trading at $9.23 per share, or 9.7x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
RLI (RLI)
Consensus Price Target: $74.33 (11.5% implied return)
Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE: RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.
Why Does RLI Catch Our Eye?
- Annual revenue growth of 14.6% over the past five years was outstanding, reflecting market share gains this cycle
- Impressive 13.9% annual net premiums earned growth over the last two years indicates it’s winning market share this cycle
- ROE punches in at 27.8%, illustrating management’s expertise in identifying profitable investments
At $66.65 per share, RLI trades at 3.8x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
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