I took a look at three stocks to avoid last week, predicting that Blink Charging (BLNK -2.51%), Stitch Fix (SFIX -6.43%), and Booking Holdings (BKNG -1.41%) were going to have a challenging week. I was way off the mark.
- Blink Charging rose 14% on the week. The operator of charging stations for electric vehicles has been one of the market's more volatile investments.
- Stitch Fix had a blowout quarter, and the online stylist-centered outfitter soared 69% for the week.
- Booking Holdings was the only one that declined, slipping nearly 2% for the week. Despite excitement over pandemic-tackling vaccines the travel industry continues to be in a funk.
The three stocks averaged a gain of 27%, fueled largely by the remarkable turnaround at Stitch Fix. For this week, I see Airbnb (ABNB -2.71%), Door Dash (DASH -0.30%), and Disney (DIS 0.76%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
There's a lot to like in the hospitality industry disruptor -- except the price. Airbnb went public on Thursday at $68, more than doubling by the end of the week. With more than 602 million shares outstanding we're looking at a market cap of nearly $84 billion heading into the weekend. Throw in another 98 million shares waiting to materialize as a result of stock options or warrants with low strike points or grants with easily reachable incentives and we're looking at a nearly $100 billion company right now.
Is Airbnb worth it? Revenue slowed from 43% in 2018 to 32% last year with losses widening in 2019. The pandemic naturally hasn't been kind. Folks aren't traveling. Hosts are hesitant to bring strangers into their homes. Revenue has plummeted 32% through the first nine months of this year. The red ink is getting worse.
With $3.6 billion in trailing revenue I wouldn't flinch at paying 23 times that multiple if I was confident that Airbnb would be back to its 2018 form -- growing quickly and generating gobs of free cash flow -- anytime soon. However, we had already seen the model prove mortal last year even before the COVID-19 crisis. A popular bullish argument is that Airbnb will be a leader out of the pandemic, as folks prefer to stay at one of the millions of options on Airbnb over traditional lodging options. I'm not sure about that. I think it will take several years for travel to recover, and along the way I'm not sure if consumers and hosts alike will be comfortable with the model in terms of sanitation and liability standards that await in the future.
Another hot debutante last week was DoorDash. The country's leading provider of third-party restaurant delivery hit the market at $102 a share, soaring 72% in its first three days of trading. Growth is on a tear. Revenue more than doubled in 2019, accelerating to 226% growth through the first nine months of 2020.
The near-term outlook is great. Indoor dining is banned again in New York City, and that will mean more people leaning on DoorDash and smaller rivals to enjoy eatery-quality food on their terms without having to head out to pick up takeout orders themselves.
The problem here is that the same catalyst fueling interest in Airbnb -- potentially overcoming the pandemic at some point in the year ahead -- will naturally backfire on DoorDash. Will DoorDash be as popular when things are back to normal? Restaurant owners will definitely have more optionality in a future where in-store dining bounces back.
This one stings. Disney was the first stock I ever owned, and I continue to own it today. However, Disney hitting new highs late last week after announcing aggressive content and pricing plans for Disney+ is a premature.
Disney+ is a smash hit, and it's only going to get bigger with an onslaught of new shows and movies. However, Disney+ is just 7% of the revenue mix. Right now Hulu combined with its live TV platform is actually generating double the revenue of Disney+. The rub here is that the growth of Disney+ will come at the expense of the media giant's box office receipts and -- more importantly -- the money it collects from cable and satellite television providers. With Disney+ not expected to turn a profit until fiscal 2024 the House of Mouse will still need its theme parks and currently docked cruise ships to work harder to offset the financial handoffs elsewhere within the company. Disney's long-term potential is undeniably bullish, but the stock's 14% surge on Friday seems excessive. Disney is vulnerable in the week ahead.
If you're looking for safe stocks, you aren't likely to find them in Airbnb, DoorDash, and Disney this week.