I took a look at three stocks to avoid last week, predicting that Blink Charging (BLNK -3.39%), Lyft, and Chuy's were going to have a challenging week. After getting burned on earlier bearish GameStop calls, things finally paid off this time.
- Blink Charging declined nearly 4% on the week.
- Lyft came through with a better-than-expected quarterly report. The stock rose nearly 9% higher on the strong showing.
- Chuy's climbed 2%. The Tex-Mex restaurant chain has been hitting fresh highs despite uninspiring financial performances.
The three stocks averaged a 2.3% ascent for the week, "Lyft"-ed higher by the ridesharing specialist's strong report. The S&P 500's 1.2% increase was a little more than half the blended return of the three stocks, so I missed. This week, I see Cedar Fair (FUN -2.25%), Sundial Growers (SNDL 0.69%), and Blink Charging as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
If you're a fan of roller coasters like me -- I've been on 219 different coasters across the U.S. and Europe -- then you've probably been to Cedar Point in Ohio. It's the heart of Cedar Fair's operations, and the country's top park for most roller coaster enthusiasts. The regional amusement park operator will report its fourth-quarter results on Wednesday morning.
It's going to be a bad report. Analysts see a huge loss on a 90% plunge in revenue. Cedar Fair essentially threw in the towel for 2020. Most of its attractions never opened for the 2020 season, and there's a near-term cash-flow implication since folks who bought annual passes a year ago won't have to pay again in 2021. Things can get even hairier if Cedar Fair can't open its gated attractions on time this year.
It doesn't make sense that Cedar Fair is trading closer to its 52-week high than to its 52-week low. It's not expected to return to profitability on an annual basis until next year, and that's assuming folks are comfortable returning to what once were crowded amusement parks and water parks. If Cedar Point opens this year, do yourself a favor and go. It's amazing. But you may want to hold back on investing in Cedar Fair stock itself until it's earning enough money to resume its once generous quarterly distributions.
One of last week's wildest stocks was Sundial Growers. Shares of the fledgling cannabis distributor soared 84% last week, but at one point on Thursday, it had nearly quadrupled before giving back the lion's share of those gains.
Pot has been hot as an investing theme since Democrats took control of Congress and the White House, eyeing broader legalization for marijuana. The problem for Sundial is that it's a small fry with a deceptively low share price. With its bloated share count, Sundial enters this new trading week with a market cap above $3 billion. This is a ridiculous multiple to pay for a company with less than $60 million in revenue. Unlike larger players that expanded their share of the market in 2020, Sundial has been flat. It's also losing a lot of money, but that's the norm in this niche at this stage of the cannabis market's growth trajectory.
Sundial is smart. It has used its buoyant share price as an opportunity to raise more capital. Its balance sheet looks great right now, and I'll give it that much. But the stock is still overpriced, and when the industry shakeout happens, it's not as if a larger player is going to overpay for a niche operator.
Just one of my three stocks to avoid from last week moved lower, and it was Blink Charging. The operator of charging kiosks for electric vehicles still seems overvalued, with a market cap north of $2.1 billion for a company with just $4.5 million in trailing revenue.
A big part of last week's bearish thesis was that it didn't make sense for Blink Charging to be worth more than Switchback Energy Acquisition (SBE), a special-purpose acquisition company (SPAC) that's in the process of taking control of industry leader ChargePoint. ChargePoint controls 73% of the market for third-party charging stations, and it generated $135 million in revenue last year.
Switchback Energy Acquisition shareholders were supposed to vote on the deal last week. It had support of 99.9% of the proxies cast -- of course -- but had to extend the voting deadline by another two weeks because it didn't get enough of its shareholders to turn in their votes. In short, it's just a matter of time before Blink Charging isn't the belle of the electric-vehicle ball.
If you're looking for safe stocks, you aren't likely to find them in Cedar Fair, Sundial Growers, or Blink Charging 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.