8 Stocks With Unrealistic Expectations

The stock market’s October hiccup reset the valuations of a number of popular stocks. But the sell-off was a friendly reminder to all investors that expectations can get easily get a bit too high on Wall Street. Bank of America uses its Beat Factor screen to identify stocks with consensus earnings estimates and price targets that are too high or too low. Beat Factor scores range from -100 to +100, with negative numbers corresponding to earnings and price target expectations that the Bank of America analyst team deems too high. Here are eight of those stocks with unrealistically high expectations.

Williams-Sonoma (ticker: WSM)

On the surface, a 2.8 percent dividend and a sub-20 price-earnings ratio may seem appealing. However, analyst Curtis Nagle says there are plenty of red flags with Williams-Sonoma stock. Nagle says an increasingly competitive environment and pricing pressures will weigh on the company’s margins, and a strong consumer environment is somehow not translating to particularly impressive sales growth. Williams-Sonoma has a Beat Factor score of -100, the lowest score among all the stocks screened. Bank of America has an “underperform” rating and $47 price target for WSM stock.

Chipotle Mexican Grill (CMG)

Expectations for Chipotle shot higher earlier this year when the company announced former Taco Bell head Brian Niccol as new CEO. Unfortunately, with CMG stock up 70 percent year-to-date, analyst Gregory Francfort says Chipotle and Niccol still have a major uphill climb. With mid-single digit same-restaurant sales growth already priced into the stock, Francfort says Chipotle will be forced to generate extremely high traffic growth to please the market. Chipotle has a Beat Factor score of -91. Bank of America has an “underperform” rating and $340 price target for CMG stock.

Tesla (TSLA)

Tesla investors breathed a sigh of relief after the company delivered on its promise to report a profitable third quarter, but analyst John Murphy says Tesla is far from out of the woods. In fact, Murphy says the third quarter may be the best quarter Tesla investors see for a long time. He says all Tesla proved in the third quarter is that it is on the path to becoming an overpriced, lower-margin automaker. Tesla’s Beat Factor is -89. Bank of America has…

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