Is Wall Street Right About These Stocks?

Wall Street fawns over the companies listed below. So why do our Motley Fool CAPS members disagree? They've tarred these stocks with one- and two-star ratings, signaling their lack of faith that the associated companies will outperform the market.

So who's got it right? The professional class of analysts, sitting in their paneled offices smoking stogies, or a motley crew of community investors, pooling their best thoughts for others to share? We think we know who'll come out ahead. How about you?

Source: Motley Fool CAPS.

Now as much as we love our CAPS community, don't sell these companies short just because they've garnered the lowest opinions. And don't buy 'em just because Wall Street says to either. Investing requires closer diligence on your part, so use these ratings as a launching pad for your own research.

A heavy burden
The Obama administration's efforts to impose tough new regulations on for-profit educators has taken a toll on industry leaders like Apollo Group and Corinthian College (Nasdaq: COCO), but it's the horrendous condition of statehouse finances that is really hurting the K-12 education segment represented by Archipelago Learning, Cambium Learning Group Nasdaq: ABCD) and K12. It was a dicey enough market that Princeton Review exited it two years ago.

Archipelago remains largely undiscovered at the moment, and only a little more than two-thirds of those rating the educator on CAPS think it will outperform the broad market averages. That could be because of the ticking time bomb in state and local budgets and while Wall Street's unanimous in its belief Archipelago can beat the market, caution would seem to be warranted here.

Let us know on the Archipelago Learning CAPS page whether the budget crisis facing state legislatures will get this for-profit educator left back.

A fat opportunity
It looks like the Street's confidence in Arena Pharmaceutical's obesity drug locaserin was misplaced as well. It just announced the FDA was sweating it, making it perform additional safety studies that's going to set back its potential debut by at least a year. Arena's putting a brave front, saying it can still submit the drug to the FDA by the end of the year, but not many people are buying it. The stock is down 15% in early morning trading.

That doesn't bode well for Orexigen Therapeutic's (Nasdaq: OREX) Contrave, particularly in light of VIVUS having new demands placed on its fat-fighting drug Qnexa.

Highly rated CAPS All-Star zzlangerhans warned investors last month there was nothing to suggest the FDA was about to make an abrupt u-turn and approve locaserin.

Same old same old on Arena. Low price but high cap at 200M plus, and the dreams of the FDA turning on a dime and approving lorcaserin are just that, dreams. BLOOM-DM didn't wow anybody and this drug will not be approved without at least one new clinical trial showing stronger efficacy. 176M of cash but 123M of debt, so only a cash balance of 50M to support the 200M cap. The rest of the pipeline is pocket change at this point.

Add Arena to the Fool's free portfolio tracker to have all the news and analysis about the biotech aggregated for you in one place.

Construct an argument for growth
With one-fifth of the more than 4,000 CAPS members rating Yahoo! to underperform the market, they may very well believe it's last best hope for growth will come from a merger with Facebook. If nothing else, it would certainly generate some buzzworthy attention the portal hasn't had since Jerry Yang screwed up the merger with Microsoft.

While Google (Nasdaq: GOOG) shrugs off Facebook's movement into search -- it's just social media, bah! -- FaceHoo, as my colleague Tim Beyers calls it would create a unified front against the search giant.

A combined FaceHoo would have one search engine (i.e., Bing), one social network (i.e., Facebook), and one communications platform (i.e., Yahoo! Mail and Messenger). It might also become a home-away-from-home for Windows Live documents and data, since Mr. Softy would surely support a combined strike at The Big G.

Without such a deal though, owens4414 finds Yahoo! is left floundering and lingering on.

Most everything yahoo does, google does better. Yahoo will hold on for a few years but I don't see too much long term potential in the company. As google is undoubtedly the better company to work, I expect google to keep on picking up innovative engineers as yahoo lags behind.

Add Yahoo! to your watchlist then head over to the Yahoo! CAPS page and let us know if merging with Facebook could be the salvation the portal has been searching for.

What's wrong with that?
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.

Sign up today for the completely free service, and tell us which side of the street will be the ultimate winner.