- Delta Airlines shareholders buckled up for a 5% descent during the week. I figured the legacy air carrier would put out a poorly received report, and the financials did come into a little turbulence with another huge loss on a sharp decline in revenue.
- Norwegian Cruise Line tumbled 7% for the week. It was a rough week for cruise lines. There was more pressure to keep the industry from resuming operations out of stateside ports this summer.
- Carnival stock was the biggest sinker of the three stocks, losing 8% of its value. It was a great week to double up on the number of cruise stocks on this list to avoid. Carnival had risen 9% the week before, and this wiped nearly all of those previous gains out.
The three stocks averaged a 6.7% slide for the week. The S&P 500 actually rose during the week. The 1.4% gain naturally beat the three stocks that all went the wrong way. This week, I see Coinbase Global (NASDAQ:COIN), American Airlines (NASDAQ:AAL), and Travelzoo (NASDAQ:TZOO) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
1. Coinbase Global
Last week's buzzworthy IPO was Coinbase Global. The leading cryptocurrency marketplace is growingly briskly. Revenue soared 144% to $1.3 billion in 2020. It was a mesmerizing debutante, of course. Coinbase priced its direct listing at a reference price of $250, and it wasn't enough. It soared when it began trading well into Wednesday's trading day. It closed out the week trading 37% above its reference price.
Coinbase is going to be one of the market's best cryptocurrency stocks, giving investors to play the entire marketplace instead of individual tokens or players. However, the $68 billion market cap it has entering the new week of trading is problematic. There are a growing number of places to trade crypto, and trading costs for investors will invariably head lower in the process. If you saw the race to zero for stock brokerages it's easy to see this become a cutthroat niche as well.
Coinbase finds itself in a potentially lose-lose situation. If cryptocurrency begins losing favor obviously this will end horribly for Coinbase. However, success for the next-gen currency vehicles can also end badly for Coinbase as major financial hotbeds embrace crypto trading at more competitive commission rates.
2. American Airlines
I was right to be worried about Delta's quarterly report last week, and now we have American Airlines as the next legacy carrier on the runway. It reports on Thursday morning.
It's fair to point out that investors are more prepared for a dud out of American Airlines now that they heard from Delta last week. American Airlines stock took a 6% hit in an otherwise buoyant market trading last week, partly in sympathy with Delta's poorly received financials -- but also because American previewed its upcoming financials. It wasn't pretty. American Airlines expects to post a larger loss than analysts were modeling. Wall Street pros see revenue cut by more than half for the period.
A rough report isn't normally going to be a deal breaker, but then you have the stock's valuation to worry about. American Airlines is fetching an enterprise value well above the $33 billion it was commanding at the end of 2019 before the pandemic became a fundamentals-crushing reality. American Airlines ascending shares along with financing through fresh shares and debt have bloated the value of the business. The valuation is out of whack, and a rough report on Thursday will only hammer that point home.
Travelzoo reported fourth-quarter results just five weeks ago, but it's back with its first-quarter results on Thursday. Travelzoo is a popular provider of travel deals with 30.2 million members worldwide, and I'll concede that this is a dangerous name to put on this list. Stimulus checks and COVID-19 vaccinations are picking up, and Travelzoo's a smart way for folks to travel sponsored getaway bargains.
The rub here is that there are still plenty of international travel restrictions in place. Travelzoo's overhead is low enough where it returned to profitability in the previous quarter, but it fell well short of analyst revenue targets. I see a repeat performance this week.
If you're looking for safe stocks, you aren't likely to find them in Coinbase, American Airlines, and Travelzoo this week.