Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here are three stocks where Wall Street’s estimates seem disconnected from reality and some better opportunities to consider.
CarMax (KMX)
Consensus Price Target: $84.19 (36.7% implied return)
Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE: KMX) is the largest automotive retailer in the United States.
Why Are We Wary of KMX?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Gross margin of 10.6% is an output of its commoditized inventory
- High net-debt-to-EBITDA ratio of 17× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $61.61 per share, CarMax trades at 15.3x forward P/E. If you’re considering KMX for your portfolio, see our FREE research report to learn more.
Scholastic (SCHL)
Consensus Price Target: $35 (105% implied return)
Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ: SCHL) is an international company specializing in children's publishing, education, and media services.
Why Does SCHL Give Us Pause?
- Sales were flat over the last five years, indicating it's failed to expand its business
- Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Scholastic’s stock price of $17.10 implies a valuation ratio of 9.9x forward P/E. To fully understand why you should be careful with SCHL, check out our full research report (it’s free).
Perdoceo Education (PRDO)
Consensus Price Target: $38 (22.5% implied return)
Formerly known as Career Education Corporation, Perdoceo Education (NASDAQ: PRDO) is an educational services company that specializes in postsecondary education.
Why Are We Cautious About PRDO?
- Annual revenue growth of 1.3% over the last two years was below our standards for the consumer discretionary sector
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Perdoceo Education is trading at $31.03 per share, or 12.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including PRDO in your portfolio.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking 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 176% over the last five years.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
