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3 Stocks to Avoid This Week

By Rick Munarriz - Sep 7, 2020 at 10:00AM

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A yoga studio staple, an electric vehicle darling, and an interrupted cruise line seem pretty vulnerable this week.

I took a look at three stocks to avoid last week, and I fell short. Just one of the three stocks moved higher, but it came through with a 10% surge to offset declines elsewhere. The three stocks I suggested investors avoided rose by an average of 0.3%. That may not seem like much, but it's better than the market's 2.3% slide.

Let me try again. I see lululemon athletica (LULU 1.49%), Tesla Motors (TSLA 4.67%), and Norwegian Cruise Line (NCLH 2.91%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.

A guy standing on a small boat as sharks circle in the water.

Image source: Getty Images.

lululemon athletica

Folks want to look good when they work out, and Lululemon has catapulted to the top among aspiration brands of high-end activewear for women. Lululemon reports financial results shortly after Tuesday's market close. 

Lululemon hit an all-time high last week, approaching $400 on Wednesday. The market is clearly enthusiastic about the Canadian retailer of premium athletic apparel, but is it warranted? Revenue declined 17% in its previous quarter, and that's not too shabby since it had to rely on e-commerce with most of its stores closed for at least part of the quarter. Analysts see $841.5 million in revenue for its fiscal quarter ending in early August, a 5% year-over-year dip. 

There's no denying the appeal of Lululemon over the past decade. It's a great company with a great product. However, we're not doing pilates in a trendy fitness center right now. Yoga has become a solo sport. Folks still want to be comfortable when working out from home, but there's no longer a need to have a wide array of outfits to stay fashion-forward in public. Lululemon will bounce back in a post-COVID-19 world, but I'm not sure if the shares should be hitting new highs days before what could be another uninspiring report. 

Tesla Motors

I realize that Tesla's been a recurring guest on this list, and I finally made the right call, with last week's slide following its stock split. Last week ended with Tesla getting snubbed for S&P 500 inclusion despite now having just 10 U.S. listed companies with larger market caps. 

Tesla has been one of the market's hottest stocks over the past year, and it will continue to be a market beater. Bullish catalysts are never far away, and you probably don't want to be against Tesla later this month when it announces what could be game-changing electric vehicle technology at its Battery Day event on Sept. 22. However, it also wouldn't be much of a surprise to see the shares continue last week's slide at least into the week ahead. 

Norwegian Cruise Line

The cruise line industry isn't at its best right now, but you wouldn't know that by seeing Norwegian Cruise Line's stock chart this summer. The stock is in the high teens again, trading at its highest level since the springtime. 

There's buzz about a COVID-19 vaccine being made available in the fall, and we're starting to see limited country-specific sailings overseas. A lot can still go wrong before Norwegian Cruise Line is cruising again, and even then it remains to be seen when it will be sailing at full capacity with its entire fleet. As long as the industry keeps pushing out resumption dates and fears of a fall surge in coronavirus cases continue to swirl it's hazardous to get too excited here.

If you're looking for safe stocks, you aren't likely to find them in lululemon, Tesla Motors, or Norwegian Cruise Line this week. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica and Tesla. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$321.69 (1.49%) $4.71
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$900.09 (4.67%) $40.20
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$14.16 (2.91%) $0.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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