Ask five analysts their perspective on a stock like Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA), and you’ll likely find five different answers. Look to the massive gap between Cathie Wood’s $2,600 Tesla price target and Pr Lekander’s $14 per-share pricing prediction for evidence of the wide disparity among analysts, even among popular and well-liked stocks. Analysts aren’t always spot-on with their forecasts or predictions. However, when stocks with negative analyst sentiment overwhelmingly swings toward the bearish side of the spectrum with limited upside presented, investors should pay attention.
Suppose a stock smells rotten, and analysts consistently agree that it stinks. In that case, there’s likely something wrong with it — while contrarian investing has its place, moving against the tide can be devastating.
These three stocks with negative analyst sentiment have an overwhelmingly bearish consensus and, therefore, aren’t worth buying today.
GameStop (GME)
It likely isn’t surprising that GameStop (NYSE:GME) tops the list of stocks with negative analyst sentiments. With the overwhelming majority of analysts saying that GameStop is a screaming sell, it seems the only bulls remaining in GameStop’s corner are the legions of bagholders continually drawn in by empty promises of a short squeeze long past overdue.
Analyst consensus pegs GameStop’s fair value at about $11 per share or more than half of today’s trade price. Meme stock status aside, the reasons are apparent. Quarterly sales for 2024’s first quarter failed to break the $1 billion mark, dropping nearly 30% on a year-over-year basis. GameStop improved its profitability prospects by $18.2 million to hit a net loss of $32.3 million. But, far from operational improvements, the narrower net loss is largely attributable to slashing SG&A expenses — which primarily came from sweeping layoffs.
Wedbush analysts are particularly bearish on GameStop, saying that the company has perhaps five years of cash available if current sales trends continue without a rapid turnaround.
Boeing (BA)
Like GameStop, it isn’t surprising that Boeing (NYSE:BA) is one of today’s top stocks with negative analyst sentiment. By now, we’re all too familiar with the multitude of aircraft and performance problems that sent shares tumbling 25% since January and keep the stock trading well below pre-pandemic levels. Worse yet, the problems are systemic and not likely correctable within a reasonable timeframe to pull it from the depths of stocks with negative analyst sentiment.
Specifically, Boeing’s problems stem from managerial decisions emphasizing financial tricks and bean counting over mechanical engineering and safety. One reporter summed the situation up succinctly: “Boeing, like many, many publicly traded companies in the country, put a premium on satisfying its shareholders” and that “the results of that at the end of the day were inferior checks and balances inside the company, a culture that promoted short-term profitability over long-term quality.”
In other words, a lack of foresight and emphasis on long-term sustainability may be the final nail in Boeing’s coffin and a definitive contributor to its status among stocks with negative analyst sentiment.
Udemy (UDMY)
Udemy (NASDAQ:UDMY) once appeared promising given the rise of remote learning platforms, but increased bearish sentiment situates it within the stocks with a negative analyst sentiment camp. In an era overflowing with free educational resources, getting customers to pay for courses they can easily access on platforms like YouTube or find in books is a tough challenge. Although Udemy boasts high-profile corporate clients such as AT&T (NYSE:T), larger companies are increasingly developing their own internal training programs, reducing the need for Udemy’s offerings.
Udemy’s customer retention numbers highlight this misalignment. While the company reported a 12% increase in total customers and a 21% rise in recurring revenue last quarter, a deeper dive into the numbers reveals a troubling trend.
Udemy experienced an 8% decline in net dollar retention, indicating a drop in how long customers stay with the service. More worrying is the 9% drop in large customer net dollar retention, which includes companies with over 1,000 employees. These figures suggest that companies aren’t sticking with Udemy for the long haul once they fulfill their immediate needs.
In the fiercely competitive EdTech market, Udemy’s difficulty in retaining customers and setting itself apart is a significant concern, making it clear why it’s situated among other stocks with negative analyst sentiment.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.