What a difference a week makes. I took a look at three stocks to avoid last week, predicting that ExxonMobil, Chuy's (CHUY 1.10%), and GameStop were going to have a challenging week. After getting burned on earlier bearish GameStop calls things finally paid off this time.
- ExxonMobil inched higher in each of the five trading days of last week, ultimately moving 11% higher. It posted better-than-expected earnings in its latest quarter, but it fell short on the top line.
- Chuy's fared even better, moving nearly 16% higher on no material news. Was I going to fall short this week? It would be up to GameStop.
- GameStop finally proved mortal, and the crash was as swift as the spike. Shares of the video game retailer plummeted 80% for the week.
The three stocks averaged a 17.7% decline, weighed down by GameStop's fall from speculative grace. The S&P 500's 4.6% increase makes me the winner this time. I needed it. This week, I see Blink Charging (BLNK), Lyft (LYFT 4.45%), and Chuy's as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
One of last year's hottest stocks was Blink Charging, the electric-charging kiosk operator that was nearly a 23-bagger in 2020. The stock is up another 25% in 2021. My bearish concerns in the past have stemmed largely from the speculative stock's valuation. You don't slap a $2.2 billion market cap on a company with just $4.5 million in trailing revenue. Is Blink Charging worth nearly 500 times its top-line results?
Blink Charging is also losing a lot of money. It has posted a larger-than-expected deficit every quarter over the past year. A company this small and consistently falling short of expectations shouldn't be a 28-bagger since the start of last year.
Bulls will argue that Blink Charging is more about the future than the past, and here is where I'll counter that this isn't the rosy market that folks think they're getting. Blink is a small overpriced fish in a much larger ocean. ChargePoint is the country's leader with roughly $135 million in revenue last year and a dominant 73% of the market for third-party charging stations. It's in the process of being acquired by Switchback Energy Acquisition (SBE), a special-purpose acquisition company (SPAC) that currently commands a market cap that is less than Blink Charging.
Switchback Energy investors will vote to approve the deal on Thursday. The ticker symbol will then change to CHPT, and the world will start to realize that ChargePoint -- forecasting revenue of $198 million -- should be worth a lot more than Blink Charging.
One can argue that Blink Charging might have some advantages over ChargePoint despite being smaller, but this is a cutthroat market where scalability matters. If size isn't a factor we can point to the even smaller Volta that's disrupting the pricing model with free ad-supported charging through its growing network of chargers. Other car makers with bigger dreams to matter in electric vehicles will also copy the Supercharger model, making third-party stations even less relevant and more expensive since car makers can subsidize their proprietary outlets through auto sales and retention.
Let's pivot from driving a car to sitting in the back of one. Lyft has emerged as the country's second-largest car-hailing service in the country. Unfortunately for Lyft it's not being used as often in the current climate. When Lyft reports its fourth-quarter results on Tuesday, analysts see more red ink on a 45% plunge in revenue.
The rub is that -- somewhat incredulously -- Lyft is trading higher than it was a year ago. The pandemic has exposed the flaws in Lyft's model. You can't pool riders together in a pandemic, eliminating the most cost-effective way to use the platform. Lyft also wasn't fortunate enough to hop on the restaurant-delivery craze early enough to become an established leader the way that its larger ridesharing rival did to hold up better in this climate. With gas prices climbing higher and our transportation needs evolving the recovery for Lyft will be longer than its stock chart suggests.
Chuy's didn't deserve to hit a new 52-week high last week. It obviously didn't earn the right to break through that ceiling again with last week's 16% pop. Investors have been warming up to the Tex-Mex causal dining chain as stimulus checks and vaccinations roll out, but why is Chuy's trading at its highest level in nearly seven years? It's not as if pre-pandemic was Chuy's was as hot as some of its spicier fare.
Chuy's is still a struggling chain of 92 units that saw its comps plunge 20% in its latest quarter. There is a small handful of restaurant concepts that have returned to positive sales growth, and Chuy's isn't one of them. When it announces financial results in early March it's not going to be the kind of report that justifies its recently buoyant share price.
If you're looking for safe stocks, you aren't likely to find them in Blink Charging, Lyft, or Chuy's 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.