I took a look at three stocks to avoid last week, predicting that Nikola, Lemonade, and Chuy's were going to have a challenging week. I fell short of the mark.
- Nikola shares revved 11% higher, as the aspiring maker of electric vehicles bounced back after a rough run.
- Lemonade shares became 2% lighter for the holiday-shortened trading week. The AI-savvy provider of insurance was one of 2020's hottest IPOs.
- Chuy's investors experienced a 5% dip. The casual dining Tex-Mex chain hit another new high to start the week, but it didn't stick.
The three stocks averaged a 1.3% advance. The S&P 500 moved 1.4% higher in that time, offering me the narrowest of victories. This week, I see Blink Charging (NASDAQ:BLNK), Baidu (NASDAQ:BIDU), and Lyft (NASDAQ:LYFT) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
With 2020 in the books I get why Blink Charging investors are taking a victory lap. The stock was up 2,198% -- nearly a 23-bagger -- to become one of last year's undeniable game-changing champions. Now ask yourself why a company with just $4.5 million in trailing revenue is trading for more than 300 times that multiple.
If you're a bull, you will argue that Blink Charging is like driving itself: You have to look at the windshield to see what's coming, rather than the rearview mirror to see what you're leaving behind. The problem is that it's not as if the future for the provider of electric car-charging stations and related offerings is going to earn its nearly $1.4 billion market cap anytime soon.
No one is going to argue that there won't be a growing demand for charging electric vehicles in the future. We know the way things are heading. The problem is that batteries will get better about giving you more miles between charges, and you can be sure that everyone from traditional gas stations to condo and office buildings will enhance their on-site charging options to the point where this becomes a commoditized niche. Remember how investors gravitated to the companies that provided Wi-Fi by the hour? That didn't end too well for them even as we become more and more connected. Blink Charging's valuation doesn't make sense right now, and the catalysts don't add up in the future.
One of my favorite Chinese growth stocks over the years has been Baidu, and rest assured I've not gone cold on China's leading search engine. Baidu has done a great job of bouncing back in 2020 with top-line growth turning slightly positive after a rough start to last year.
There is a lot to like about how Baidu has cashed in on its dominant position in search to expand into other areas of growth. Baidu is a 26-bagger since 2006, and my long-term conviction remains strong. However, the headlines about Chinese stocks for stateside investors will be challenging this week. Baidu is not among the stocks that are tanking on Monday after an executive order to delist companies identified as affiliated with the Chinese military. However, some stateside investors may get nervous about owning Chinese stocks in this climate until we get better visibility on how things will play out. Baidu is a stock to avoid this week, but I'm still a bull on its long-term prospects.
One of 2020's biggest surprises posting positive returns is Lyft. The ride-hailing platform saw its stock rise 14% last year despite having its business decimated by the pandemic. But unlike the industry's top dog, Lyft has been slow to expand outside of North America or its core personal mobility offering.
We're not going out as often as we used to, and masking up for a ride in the backseat of a car that is being ridden by a lot of other people isn't a very tantalizing option. Lyft revenue plummeted 48% in its latest quarter and 61% the period before that.
Lyft has finally started to diversify away from just providing folks with rides, but it may be too late. It may take a couple of years before Lyft returns to its position before the COVID-19 crisis. I don't think it earned last year's upticks, and it wouldn't surprise me to see some of that come off the board in early 2021.
If you're looking for safe stocks, you aren't likely to find them in Blink Charging, Baidu, or Lyft this week.