These three stocks seem pretty vulnerable right now.
I took a look at three stocks to avoid last week, predicting that Norwegian Cruise Line Holdings(NYSE:NCLH), GameStop (NYSE:GME), and Blink Charging (NASDAQ:BLNK) would have a bad week.
- Norwegian Cruise Line stock coasted 3% higher. The travel climate is improving, even if cruise lines continue to face high hurdles to clear before resuming operations.
- Shares of GameStop rose 6% for the week. It bounced back after back-to-back weeks of double-digit percentage declines. It did announce the appointment of a new chief growth officer, and that’s going to be a tall order for a company that’s generating a little more than half the sales it delivered five years ago.
- The biggest gainer of the lot was Blink Charging, soaring 15% during the shortened trading week as investors flocked back to electric vehicle (EV) stocks.
The three stocks averaged a huge 8% gain for the week. The S&P 500 actually rose a mere 1.1% last week, so I was well off the mark. Let’s see if I can turn things around. This week, I see Carnival (NYSE:CCL), BowX Acquisition (NASDAQ:BOWX), and Blink Charging as vulnerable investments in the near term. Here’s why I think these are three stocks to avoid this week.
I singled out the country’s third largest cruise line last week. I’m aiming at the top dog this time around. Cruising operators finally have some clarity on the path to start sailing again, and that’s a positive development. The bad news is that we’re now clearly looking at several months before revenue-generating customers are boarding a cruise ship out of a U.S. port.
Carnival’s making the cut this week as a stock to avoid because it’s offering up a financial update on its fiscal first quarter this week. Carnival’s report is going to be rough. It’s going to be another massive quarterly loss, and analysts see a 96% plunge in revenue. Everyone’s bracing for a bad report, but Carnival has posted a larger than expected deficit in three of the past four quarters.
2. BowX Acquisition
Let me see if I have this right. WeWork finally strikes a deal to hit the market by joining forces with a special-purpose acquisition company (SPAC) called BowX, and the shell hits an all-time high? Wasn’t a WeWork IPO a popular stock market punchline two years ago?
This isn’t even the same WeWork that had to pull its 2019 IPO because investors weren’t buying into the poor business model. Things have actually gotten worse. The pandemic has scared away budding entrepreneurs from co-working spaces. Rival Knotel filed for bankruptcy protection in February, selling its assets that were at one time valued at $1.6 billion for a mere $70 million. In an effort to win back customers WeWork recently slashed its rates by as much as 10%.
BowX stock has appreciated 33% in the five trading days since the announcement of the deal for WeWork. Really? The deal originally valued WeWork at $9 billion including debt, and that was before the stock’s surge. A whopping $800 million of the $1.3 billion in new capital being infused in the enterprise is coming from a PIPE financing round– PIPE stands for private investment in public equity — and that’s problematic. PIPE funding has been a rude awakening for folks bidding up a SPAC after it announces an acquisition target since it’s often at a discount to the stock price. If Wall Street’s getting excited about the market debut of a company that tanked its 2019 interview, that tells you how many people are new to investing these days. WeWork probably won’t work.
3. Blink Charging
I love growth stocks just like the next ceiling watcher, but Blink Charging’s valuation doesn’t make a lick of sense. This is a small operator of charging kiosks for electric vehicles (EVs). It has just $6.2 million in trailing revenue, but it’s now fetching a market cap of more than $1.7 billion. Even with strong growth prospects, the math doesn’t work for a winning investment when the starting line is a trailing revenue multiple of 277.
There’s no denying that EVs are the future. The problem is that there are already larger charging kiosk operators. There are disruptive models like ad-based complimentary charging that will eat into the revenue potential of third-party networks. In the meantime, Blink’s quarterly losses are getting larger, and its share count is rapidly expanding every three months.
If you’re looking for safe stocks, you aren’t likely to find them in Carnival, BowX Acquisition, and Blink Charging this week.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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