- Coinbase was a big loser last week. It slipped every single trading day, plunging 15% along the way. Some of the shine was already starting to come off of this month's hot debutante, but it certainly didn't help that crypto prices were correcting sharply last week.
- American Airlines declined 4% for the week. It reported mixed quarterly results. The legacy air carrier is seeing bookings start to pick up, but rising costs may eat away at a potential recovery.
- Finally we have Travelzoo matching American Airlines with its own 4% descent last week. The travel deals publisher saw its quarterly revenue decline 30% from a week earlier, but there was better-than-expected sequential improvement. It wasn't enough to impress the market.
The three stocks averaged a 7.7% slide for the week. The S&P 500 was roughly flat for the week, with a 0.1% decline that was better than all three declining stocks. This is the second week in a row where all three stocks fall in a flat or rising market. This week, I see Coinbase Global, Six Flags Entertainment (SIX 6.17%), and MicroStrategy (MSTR 1.50%) 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 crypto correction rocked Coinbase. The leading cryptocurrencies were showing signs of weakness even before buzz about a big tax hike on capital gains for the country's wealthiest earners ate into the market's enthusiasm.
Corrections are normal, and in many ways healthy. Bitcoin (BTC -0.05%) and other viable digital currencies should bounce back. The problem here is that Coinbase itself was overvalued and vulnerable. The leading marketplace for all things crypto is facing stiff competition in the near future, and it will have to cut its trading commissions if it wants to remain the top dog. I remain a long-term bull on cryptocurrency stocks in general, but Coinbase remains overpriced at 45 times trailing revenue.
2. Six Flags Entertainment
I have a soft spot for thrill rides and regional amusement parks. I'm proud to say that 67 of the 219 roller coasters that I have ridden -- yes, I do keep track -- are Six Flags attractions. However, with the thrill maker reporting financial results on Wednesday I do have my near-term concerns on the chain as an investment.
The stock is trading much higher than it was in the months leading up to the pandemic, and that's problematic. Don't get me wrong. Folks are clamoring for diversions. The economy is going to bounce back a lot faster than worrywarts thing with all of the money that we collectively saved during the past year. However, Six Flags still isn't worth more than it was before the COVID-19 crisis.
Wednesday morning's report may not seem very relevant. The first three months of the year are soft for this seasonal operator. Analysts see a 53% year-over-year decline in revenue, but Six Flags will talk up the upcoming summer season with strong pass sales and buoyant attendance at parks that have already opened. One trend that isn't so kind is that it has posted a larger-than-expected loss in each of its last three quarters. Until that streak is snapped, Six Flags doesn't deserve to be trading near an 18-month high.
If you like your enterprise software companies with a side of crypto you may as well order a plate of MicroStrategy. MicroStrategy is a meandering provider of enterprise analytics, and these days it's the CEO's commitment to Bitcoin on its balance sheet that is the real entree here.
The business itself of MicroStrategy will not impress you. It's a profitable platform, but it has seen its revenue decline for six consecutive quarters. Shrinking in a market that is actually growing is not a good sign. The silver lining at MicroStrategy is that founder CEO Michael Saylor has been investing the company's cash reserves in Bitcoin. MicroStrategy has spent $2.21 billion to acquire 91,326 Bitcoin tokens.
At the crypto's peak of nearly $65,000 two weeks ago, MicroStrategy's stake was valued at more than $5.9 billion. At a recent price of $48,000 as of early Sunday evening, we're not at $4.4 billion. MicroStrategy commands an enterprise value of $6.5 billion, but it's not as if the fading analytics business was worth more than $2 billion before Saylor's obsession with Bitcoin.
I think Saylor is right about Bitcoin, but it's hard to get investors excited about near-term upside when the world's leading crypto is going the wrong way. MicroStrategy reports financial results after Thursday's market close, and it will be hard to get the market excited unless Bitcoin stages a huge rally in the next few days.
If you're looking for safe stocks, you aren't likely to find them in Coinbase, Six Flags, and MicroStrategy this week.