I took a look at three stocks to avoid last week, predicting that GameStop (GME 2.56%), American Airlines Group (AAL 1.51%), and Danimer Scientific (DNMR 0.48%) would have a bad week.
- Shares of GameStop plummeted on Wednesday after the company reported problematic financial results. This isn't surprising, especially since the stock has moved lower the day after posting financial results in nine of the past 10 quarters. The stock bounced back on Thursday, but it wasn't enough to save GameStop investors from back-to-back rough weeks. Shares of the video game retailer fell nearly 10% for the week.
- American Airlines shares also turned on its "fasten your seatbelts" light as it began its descent. The struggling legacy airline saw its weekly stock slide clock in at 8%, erasing the prior week's 7% ascent.
- Danimer Scientific was the biggest loser, plummeting 23% for the week. It faced stiff headwinds heading into the week on reports disputing the biodegradable claims of its plant-based plastic products, but this wasn't just a Monday sinker. Danimer Scientific moved lower in four of last week's five trading days.
The three stocks averaged a sharp 13.7% decline for the week. The S&P 500 actually rose 1.6% last week. Let's see if I can keep it going. This week, I see Norwegian Cruise Line Holdings (NCLH -0.21%), GameStop, and Blink Charging (BLNK -0.86%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Image source: Getty Images.
1. Norwegian Cruise Line Holdings
Cruise lines can't seem to catch a break. We've now lapped a year since the industry shut down for the pandemic, and there are no signs that we'll be sailing again anytime soon. Last week we saw Florida's governor and bipartisan support from local politicians join the Cruise Lines International Association in asking for the Centers for Disease Control and Prevention to ease up on their restart benchmarks to get cruise lines sailing again by July. The regulatory agency failed to buckle.
Norwegian Cruise Line shares suffered a 10% hit last week. It's not easy being the third-largest player in the hardest-hit travel niche, but its enterprise value is actually much higher now than it was at the end of 2019 -- months before the COVID-19 crisis gripped the globe. Norwegian Cruise Line lacks the scalability of the top dog and the pre-pandemic margins of the industry's second-largest player. If we're in for a dry summer Norwegian Cruise Line is probably going to take the hardest hit.
2. GameStop
The video game retailer is coming off back-to-back weeks of 24% and then 10% declines. GameStop has recovered nicely this year when has retreated. It also bounced back last year after quarterly results that were poorly received at first. Why is GameStop making a repeat appearance on this list?
One can also argue that there are some positive catalysts in play now. Stimulus checks will translate into video game sales. GameStop is giving e-commerce and digital delivery another go with fresh faces. So, again, why is GameStop coming back for an encore performance here?
The problem with GameStop is that this is still a fading retailer that last week stretched its streak of declining year-over-year net sales to 12 quarters. Even the push of big-ticket PS5 consoles sales wasn't enough to turn the tide. GameStop remains overvalued until its fundamentals turn the corner.
3. Blink Charging
One of last year's hottest stocks remains one of today's most overvalued investments. The small yet fast-growing operator of charging kiosks for electric vehicles has generated just $6.2 million in trailing revenue, but it's fetching a market cap of $1.5 billion. This isn't a company worth more than 200 times trailing earnings.
The electric vehicle market is heating up, but Blink Charging remains a small player going through a potential identity crisis in this fluid playing field. Between car-specific proprietary plays -- hello there, Supercharger stations -- and sponsor-subsidized freebie kiosks, it's risky to overpay for a potentially promising company that still has a lot to prove to earn its 10-figure market cap.
If you're looking for safe stocks, you aren't likely to find them in Norwegian Cruise Line, GameStop, and Blink Charging this week.
