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 is one stock where you should be greedy instead of fearful and two facing legitimate challenges.
Two Stocks to Sell:
Builders FirstSource (BLDR)
Consensus Price Target: $139 (4.7% implied return)
Headquartered in Irving, TX, Builders FirstSource (NYSE:BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.
Why Are We Hesitant About BLDR?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.2% annually over the last two years
- Earnings per share have contracted by 22.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Eroding returns on capital suggest its historical profit centers are aging
Builders FirstSource is trading at $132.75 per share, or 15.5x forward P/E. Read our free research report to see why you should think twice about including BLDR in your portfolio.
Affirm (AFRM)
Consensus Price Target: $74.44 (0.4% implied return)
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ:AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Does AFRM Worry Us?
- Negative return on equity shows that some of its growth strategies have backfired
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $74.15 per share, Affirm trades at 35.4x forward P/E. Check out our free in-depth research report to learn more about why AFRM doesn’t pass our bar.
One Stock to Buy:
Costco (COST)
Consensus Price Target: $1,073 (10.5% implied return)
Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ:COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.
Why Will COST Outperform?
- Same-store sales growth averaged 5% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Unparalleled revenue scale of $268.8 billion offsets its poor gross margin and gives it advantageous pricing and terms with suppliers
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Costco’s stock price of $970.41 implies a valuation ratio of 50x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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