I took a look at three stocks to avoid last week, predicting that Blink Charging (BLNK -0.84%),Tesla Motors, and Delta Airlines were going to have a challenging week. I missed.
- Blink Charging rose early in the week, but gave back a chunk of those gains on Friday. The electric vehicle charging specialist still closed out the week with a 7% gain.
- Tesla shifted in reverse with a 6% decline. The stock had rallied in recent weeks on strong deliveries and its addition to the S&P 500 index.
- Delta Airlines failed to impress with its quarterly report, but the airline was flat for the week. It declined a mere 0.1%, so let's call that a draw.
The three stocks averaged a 0.3% advance. It may not seem like much, but the S&P 500 declined 1.5% in that time. I was wrong. This week, I see Blink Charging, DoorDash (DASH -0.61%), and GameStop (GME 0.10%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Image source: Getty Images.
Blink Charging
When gravity catches up to Blink Charging -- and it will at some point in 2021 -- the warning signs will be more evident than they seem right now. It's not just the fact that a company with a mere $4.5 million in trailing revenue is fetching a market cap of nearly $2 billion, a whopping 435 times its top line. It's not just the question marks behind the business model, the elusive path to profitability, and the inevitable cutthroat competition if this is a market worth fighting for in the future.
We can just look back to last week. Chairman Michael Farkas sold $22 million worth of Blink Charging stock, and the shares still moved higher for the week. I know I've been on the wrong end of the stock chart by singling out this Blink Charging as an investment to avoid in the first two weeks of 2021. Let's see if the third time's the charm -- or harm, in this case.
DoorDash
One of the more surprising names hitting fresh highs last week was DoorDash. The leading takeout delivery specialist seemed overvalued when it soared out of the gate during last month's IPO. Now it's trading even higher.
Buzz about DoorDash entering the largely untapped Japanese market helped fuel the rally, but one has to be skeptical about a seemingly obvious opportunity when others have failed in the past. DoorDash is growing at a fast clip these days. Revenue soared 268% in its latest quarter. However, with the world finally seeing a light at the end of the pandemic tunnel we could be at Peak DoorDash. As hot as this December IPO stock has been, the volatility cuts both ways. Expect DoorDash to be one of the biggest sinkers in the next market correction given the limitations of its model.
GameStop
It's hard to believe that GameStop more than doubled last week, soaring 100.7%. The small-box video game retailer had a lot of things go right. It installed three new activist directors to its board, signaling a willingness to shake things up. It generated positive holiday sales, fueled by the rollout of new video game consoles. Finally GameStop has heavy short interest. It doesn't take much to trigger a short squeeze.
It's hard to see the gains sticking around. GameStop can replace its entire board with activists. It's not going to stop the systemic decline with a model that revolves around the selling and the more lucrative reselling of physical video games in a digital world. The strong holiday consists largely of low-margin hardware. As for the short squeeze, if many have naysayers covered last week it will make another squeeze less likely in the near term.
If you're looking for safe stocks, you aren't likely to find them in Blink Charging, DoorDash, or GameStop this week.
