Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.

Two Stocks to Sell:

C3.ai (AI)

Consensus Price Target: $8.82 (6.6% implied return)

Named after the three Cs of its original focus—carbon, cloud computing, and customer relationship management—C3.ai (NYSE: AI) provides enterprise AI software that helps organizations develop, deploy, and operate large-scale artificial intelligence applications across various industries.

Why Do We Steer Clear of AI?

1. Products, pricing, or go-to-market strategy need some adjustments as its billings have averaged 11.2% declines over the last year
2. Sky-high servicing costs result in an inferior gross margin of 43.5% that must be offset through increased usage
3. Free cash flow margin is forecasted to shrink by 12.6 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

C3.ai is trading at $8.27 per share, or 5.6x forward price-to-sales. Read our free research report to see why you should think twice about including AI in your portfolio.

Marcus & Millichap (MMI)

Consensus Price Target: $28 (6.8% implied return)

Founded in 1971, Marcus & Millichap (NYSE: MMI) specializes in commercial real estate investment sales, financing, research, and advisory services.

Why Is MMI Risky?

1. Sales trends were unexciting over the last five years as its 1% annual growth was below the typical consumer discretionary company
2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Marcus & Millichap’s stock price of $26.23 implies a valuation ratio of 38.7x forward P/E. If you’re considering MMI for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Ross Stores (ROST)

Consensus Price Target: $229.81 (6.4% implied return)

Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.

Why Does ROST Stand Out?

1. Same-store sales growth lends it the confidence to gradually expand its store base so it can reach more customers
2. Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.6% over the past two years
3. ROIC punches in at 31.6%, illustrating management’s expertise in identifying profitable investments

At $216.03 per share, Ross Stores trades at 29.4x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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