3 of Wall Street’s Favorite Stocks Skating on Thin Ice

Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.

Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. That said, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.

DocuSign (DOCU)

Consensus Price Target: $96.70 (28.4% implied return)

Founded by Seattle-based entrepreneur Tom Gonser, DocuSign (NASDAQ:DOCU) is the pioneer of e-signature and offers software as a service that allows people and organisations to sign legally binding documents electronically.

Why Are We Wary of DOCU?

1. Offerings struggled to generate meaningful interest as its average billings growth of 6.6% over the last year did not impress
2. Platform has low switching costs as its net revenue retention rate of 99.8% demonstrates high turnover
3. Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low

DocuSign’s stock price of $73.24 implies a valuation ratio of 5.4x forward price-to-sales. If you’re considering DOCU for your portfolio, see our FREE research report to learn more.

Bentley (BSY)

Consensus Price Target: $56.58 (32.2% implied return)

Founded by brothers Keith and Barry Bentley, Bentley Systems (NASDAQ:BSY) offers a software-as-a-service platform that addresses the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater facilities.

Why Does BSY Worry Us?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 7.5% average billings growth over the last year was weak
2. Estimated sales growth of 9.3% for the next 12 months implies demand will slow from its three-year trend
3. Projected 2.6 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position

Bentley is trading at $40.88 per share, or 9.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BSY.

BD (BDX)

Consensus Price Target: $277.80 (38.5% implied return)

With a history dating back to 1897 and a presence in virtually every hospital around the globe, Becton Dickinson (NYSE:BDX) develops and manufactures medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions and professionals worldwide.

Why Are We Cautious About BDX?

1. Annual sales growth of 3.6% over the last five years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
2. 5.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Underwhelming 4.3% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $198.55 per share, BD trades at 14.2x forward price-to-earnings. To fully understand why you should be careful with BDX, check out our full research report (it’s free).

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. 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.