3 unpopular stocks that concern us

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.

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 facing legitimate challenges and some alternatives worth exploring instead.

C3.ai (AI)

Consensus Price Target: $8.90 (-28% 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 Should You Sell AI?

1. Products, pricing, or go-to-market strategy need some adjustments as its billings have averaged 24.5% declines over the last year

2. Bad unit economics and steep infrastructure costs are reflected in its gross margin of 29.1%, one of the worst among software companies

3. Cash-burning history makes us doubt the long-term viability of its business model

C3.ai’s stock price of $12.36 implies a valuation ratio of 8.2x forward price-to-sales. Read our free research report to see why you should think twice about including AI in your portfolio, it’s free.

Fortrea (FTRE)

Consensus Price Target: $21.71 (-9.9% implied return)

Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ:FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.

Why Do We Think FTRE Will Underperform?

1. Annual sales declines of 3% for the past five years show its products and services struggled to connect with the market during this cycle

2. Push for growth has led to negative returns on capital, signaling value destruction, and its falling returns suggest its earlier profit pools are drying up

3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $24.09 per share, Fortrea trades at 25x forward P/E. To fully understand why you should be careful with FTRE, check out our full research report (it’s free).

Northern Trust (NTRS)

Consensus Price Target: $181.21 (7.9% implied return)