3 stocks to avoid this week
JMarkets are rising again, and the same can be said for my three stocks to avoid last week. The three names I thought were going down for the week — AMC Entertainment (NYSE: AMC), BuzzFeed (NASDAQ: BZFD)and Ollie’s Bargain Outlet Holdings (NASDAQ: OLLI) – climbed 28%, 3% and 1%, respectively, with an average increase of 10.7%.
the S&P500 rose 1.8% for the week, so I fell well short of my stocks to avoid. I still win more often than not, though. The S&P 500 has consistently outperformed my bear picks — meaning I’ve beaten the market, as these are stocks I suggest investors avoid — in 18 of the past 23 weeks. This week I see GameStop (NYSE: GME), Soft (NYSE:CHWY)and AMC Entertainment as stocks you might want to consider walking away from. Let’s review my short-term concerns.
I was right to pick GameStop in this column when it released its financial results two weeks ago, as the video game retailer slid 2% in an otherwise buoyant week for the market. However, after seeing the stock jump 67% last week – one of Wall Street’s biggest gainers – I’m going to put it back on this list after a happy week-long hiatus.
There was some encouraging insider buying at GameStop last week, but certainly not the kind of volume that would warrant that kind of push. GameStop has done some smart things since gaining national attention after becoming a meme store, and contrary to the stance Barrons took last weekend – blowing the retailer’s plan to launch an NFT Marketplace by this summer – I think GameStop has a chance to expand into next-gen digital platforms thanks to its brand awareness .
The problem is that GameStop has a lot to prove. It has posted four straight years of nine-figure losses. Its trailing revenue is not only lower than it was two years ago, but also 37% lower than its decade-long peak revenue. Its original model is fading in a world of digital game distribution, and the losses will continue as corporate reinventions don’t come cheap.
Chewy, the online retailer of pet food, accessories and other supplies, is one of the companies that announced new financial results this week. We’ve seen pet stocks languish in recent months, which is surprising since so many of us adopted furry friends two years ago when the pandemic began. The bullish thesis was that we would spoil these new members of our family for years to come, but publicly traded coins profiting from this trend have been absolute dogs as investments.
Momentum is not soft as we head into Chewy’s fiscal fourth quarter results shortly after Tuesday’s close. Soft stocks have fallen in consecutive quarters, signaling a bigger-than-expected loss with problematic indications. The long-term outlook is bright here, but until he breaks this string of disappointing financial updates, Chewy should be crated.
The nation’s largest multiplex operator was the biggest winner of the three stocks to avoid in my column last week. The stock rose despite the lack of bullish developments. The confusing purchase of a penny miner continues to unfold. Shares of the mining company have fallen since announcing the deal with AMC, and last week the miner diluted its investors in a fundraising round.
Life doesn’t hold up much better for AMC on its flagship silver screen. The term that ends this week has been a dud. Ticket sales for the industry this year are 42% lower than they were at this point in 2019. Let’s go back to 2018 and 2017, and we’re talking about 52% and 54% drops in box office receipts national. AMC is gaining market share and increasing its dealership sales. His comparisons will be softer, but still well below where they were three, four and five years ago.
The good news for AMC is that a bigger slate of potential blockbuster movies is coming. Will this be enough to justify the historically high valuation of the title? The chain’s curious decision to go pump penny stocks — and so far failing — isn’t a good look.
If you’re looking for safe stocks, you probably won’t find them at GameStop, Chewy, and AMC Entertainment this week.
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Rick Munarriz has no position in the stocks mentioned. The Motley Fool owns and recommends Chewy. The Motley Fool recommends Ollie’s Bargain Outlet Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.