- AMC was flat for the week. It surged higher on Monday, only to slip in three of the four subsequent trading days.
- Trivago moved 1% higher. The online lodging catalog had easy year-over-year comparisons, but revenue is still 55% lower than it was for the same period two years ago. It was also Trivago's sixth consecutive quarterly deficit.
- Finally, Imax tumbled nearly 5% last week. The provider of super-sized theatrical screening experiences handily beat expectations in last week's quarterly report, but at least one analyst slashed his price target on the stock citing an Imax box office recovery that was lagging initial expectations.
The three stocks averaged a 1.2% decline for the week. The S&P 500 dipped 0.4%, so I was right for the fifth time in the past six weeks. Right now, I see AMC Entertainment Holdings, Eventbrite (NYSE:EB), and GameStop (NYSE:GME) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
I think AMC is doing its best playing the bad hand that the multiplex industry has been dealt, but this summer is running away from the exhibitors. Box office receipts are decelerating instead of accelerating in recent weeks, and now masking recommendations given the spike in COVID-19 cases is going to send even more people back to streaming first-run content from the comfort of home.
There was also a very interesting tweet by CEO Adam Aron. After seeing its outstanding share count more than quadruple over the past year to a whopping 513.3 million he pointed out that AMC hasn't issued more stock since June, and that's great. However, he followed that up with this beefy missive.
As to the existence of so-called fake or synthetic shares, or the naked short selling of AMC shares, we are unaware of any information validating these theories. Also, we are unable to make any comment on the considerable trading of puts/calls derivatives.— Adam Aron (@CEOAdam) July 30, 2021
Aron has been chummy with the bulls, but it's telling that he's trying to distance himself from conspiracy theories about synthetic and naked shorts or options trading weighing on the stock. AMC continues to be one of this year's best-performing stocks, but with the fundamentals lagging and retail investors chasing theories that even the CEO is publicly shaking off, one has to wonder if reality is crashing the party. AMC is gaining market share in the multiplex space with some shrewd moves, but the pie itself is shrinking.
Eventbrite emerged as an obvious play on the post-pandemic reopening of the economy. The popular online events ticketing platform is positioned well to benefit from a return to live shows, festivals, and other events.
Eventbrite reports fresh financials after Thursday's close. It will be another strong report given the accelerating momentum we saw for live events between April and June, but it will be hard-pressed to be upbeat about its near-term results. With COVID-19 cases surging -- particularly among young people that tend to gravitate to live concerts and shows -- the more challenging it will be for Eventbrite to stay on track.
Making matters worse, this is a stock that is roughly where it was trading exactly two years ago. In short, it's back to pre-pandemic levels. Eventbrite was applauded for cost cuts last year, but it posted a larger than expected deficit in its most recent quarter. This is a dangerous name to own heading into what could be a mixed report.
It's now been six months since GameStop and AMC took off as the poster children of the meme stocks revolution. Both stocks continue to be among this year's biggest gainers, but momentum is starting to play a different game.
Retail investors are moving on. Trading volume on GameStop in July was its weakest monthly showing in more than a year. The party can start again at any minute, but GameStop still has a challenging future. It's just that its high-margin business of reselling physical games is fading in the era of digital distribution. Console makers and software developers have embraced direct distribution. GameStop wants into this niche, but even if it's successful it won't be as lucrative as it was when we were at peak GameStop -- and its stock is still trading much higher than it was when the specialty retailer was in its prime.
If you're looking for safe stocks, you aren't likely to find them in AMC, Eventbrite, and GameStop this week.