A cruise line, car-sharing platform, and online travel site seem pretty vulnerable right now.
I took a look at three stocks to avoid last week, predicting that Despegar.com (NYSE:DESP), Gogo (NASDAQ:GOGO), and Gap (NYSE:GPS) were going to lose to the market. I missed.
- Despegar.com rose 13%. Revenue fell a lot harder than Wall Street expected, but the company managed to post a smaller deficit that analysts were modeling. The Latin American travel portal also announced that it had achieved its cost-savings goal.
- Gogo soared nearly 20%. I figured it would be a market laggard after selling its flagship commercial aircraft online-connectivity platform, but it’s still providing data and services to business jets. The encouraging vaccine news helped travel stocks move higher.
- Gap rose just 3% for the week. “‘Fall into the Gap,’ may have been the old Gap jingle, but right now it seems as if it’s investors falling into the Gap trap,” I argued last week, and that’s pretty much how it played out in an otherwise buoyant trading week.
The three stocks averaged a 12% ascent, blowing away the S&P’s 2% climb for the week. Let’s see if I can bounce back.
For this week, I see Norwegian Cruise Line (NASDAQ:NCLH), Lyft (NASDAQ:LYFT), and TripAdvisor (NASDAQ:TRIP) as vulnerable investments in the near term.
Here’s why I think these are three stocks to avoid this week.
Norwegian Cruise Line
The country’s third-largest cruise-line operator posted disappointing financial results last week. Revenue for the third quarter fell short of Wall Street estimates, and the company posted a larger adjusted loss than analysts were targeting. The stock still rallied — soaring 18% for the week — as investors grew excited about the potential of a viable vaccine hitting the market in the coming months.
Let’s salt down that ocean water. Norwegian Cruise Line still has a long way to go. The vaccine isn’t expected to reach mainstream distribution until the springtime, at the earliest, and the industry will have to jump through a lot of hoops before it can start sailing from the U.S. next year.
Norwegian Cruise Line had $1.2 billion in advance bookings at the end of September, but more than two-thirds of that amount comes from folks who had cruises canceled this year and either chose enhanced future cruise credit or didn’t request cash refunds in time.
This has been quite the month for the country’s second-leading ride-hauling platform. The stock is up 64% in November. California voters approved a ballot measure that exempts Lyft and its peers from the heavy cost burden of having to treat its independent contractors as employees. Then we had last week’s encouraging COVID-19 vaccine news, a development that will help Lyft grow its business again.
Lyft can use the lift. Its active riders count has plummeted 44% over the past year. Folks just aren’t traveling as much as they used to for work, leisure, and errands. It did post better-than-expected revenue last week, but this is still the ghost of the company it was a year ago. Lyft has a long way to go before it’s back.
All things travel took off last week, given the encouraging pandemic news, but was TripAdvisor’s 28% weekly surge warranted? The big gain may have overshot the runway.
It’s certainly true that TripAdvisor is at its best when folks are traveling and looking up reviews for hotels and attractions of where they’re heading. However, TripAdvisor wasn’t doing so well before the COVID-19 mess.
This is going to be a terrible year for TripAdvisor, but it will be the third time in the last five years where revenue declines. TripAdvisor was once a market darling, but it hasn’t posted double-digit growth on the top line since 2015. Travelers were already weaning themselves off of the platform before the pandemic. I think the initial euphoria that sent the shares higher this past week will book a return flight to Pessimistville now.
If you’re looking for safe stocks, you aren’t likely to find them in Norwegian Cruise Line, Lyft, and TripAdvisor this week.
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