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.

Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. That said, here is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where its enthusiasm might be excessive.

Two Stocks to Sell:

Williams-Sonoma (WSM)

Consensus Price Target: $182.85 (17.7% implied return)

Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE:WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.

Why Are We Cautious About WSM?

1. Recent store closures and weak same-store sales point to soft demand and an operational restructuring

2. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience

3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 4.8 percentage points

At $147.87 per share, Williams-Sonoma trades at 18.5x forward price-to-earnings. Check out our free in-depth research report to learn more about why WSM doesn’t pass our bar .

KB Home (KBH)

Consensus Price Target: $73.96 (30.8% implied return)

The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.

Why Do We Pass on KBH?

1. Demand cratered as it couldn’t win new orders over the past two years, leading to an average 22.9% decline in its backlog

2. Earnings per share have contracted by 5.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.5 percentage points

KB Home is trading at $51.62 per share, or 6.7x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than KBH .

One Stock to Buy:

Reddit (RDDT)

Consensus Price Target: $188.58 (74.6% implied return)

Founded in 2005 by two University of Virginia roommates, Reddit (NYSE:RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.

Why Should You Buy RDDT?

1. Domestic Daily Active Visitors have increased by an average of 31.7% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features

2. Earnings per share grew by 80.4% annually over the last two years and trumped its peers

3. Free cash flow margin expanded by 43.9 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends