In last week's article on three stocks to avoid, I predicted that Fossil (FOSL 2.50%), Cricut (CRCT 2.27%), , and GameStop (GME 0.19%) would have a rough few days.
- Fossil was a big winner, climbing nearly 10% last week. The watchmaker posted better-than-expected results, lifting its outlook for the balance of the year.
- Cricut was the biggest loser in the list, plummeting more than 21% for the week. It plunged 18% on Friday after posting disappointing guidance in its latest quarterly report.
- Finally, GameStop moved 7% higher.
The three stocks averaged a 1.3% decline for the week, fueled entirely by Cricut's slide. The S&P 500 rose 0.7%, so I was right for the seventh time in the past eight weeks. Right now, I see Madison Square Garden Sports (MSGS +2.90%), Carnival (CCL 3.44%), and GameStop as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Image source: Getty Images.
Madison Square Garden Sports
If you're a fan of the New York Knicks or New York Rangers, you can one-up your fandom by becoming a part-owner. Madison Square Garden Sports owns the two teams along with a few developmental teams and some of the practice facilities. Madison Square Garden Sports does not own the iconic namesake venue in New York City. The building and the rest of its entertainment businesses were spun off last year as Madison Square Garden Entertainment (MSGE +2.31%).
Both stocks are trading near their 52-week lows, but Madison Square Gardens Sports is the one reporting financial results on Thursday. The spinoff will step up with fresh financials next week.
It's easy to be worried heading into this week's earnings report. Madison Square Garden Sports has posted a larger-than-expected loss in three of the past four quarters. We're also seeing ratings for the NBA and NHL -- where the Knicks and Rangers play -- trending well below their peaks in 2017 and 2013, respectively.
Carnival
It's been a lot harder for the cruise line industry to get going again this summer. False starts and COVID-19 outbreaks are eating into the near-term potential of Carnival and its smaller rivals.
Last month, Carnival thought it could be operating up to 75% of its fleet capacity by the end of this year, but with the Delta variant emerging and record case counts in the popular U.S. port states of Florida and Texas, question marks remain.
Last week we had one of the biggest outbreaks, as 27 crew members and passengers aboard the Carnival Vista tested positive with COVID-19 as it sailed from Texas to Belize. The crushing part of the story is that they were all reportedly vaccinated. The good news is that most are asymptomatic or experiencing mild symptoms, but this is a cruise ship. If not caught in time, they ran the risk of getting off at the next port and spreading the virus.
Carnival stock has fallen 27% since its early June highs, so one can argue that a lumpy recovery is already factored into the shares. I would counter that Carnival is still trading at its pre-pandemic enterprise value despite a long recovery in the cards.
GameStop
GameStop's original "meme stock" rally began in late January, when short interest was more than 100% of the shares outstanding. It didn't take much for a short squeeze to happen. Now we're at the other end of the spectrum. Just 10.3% of the shares of the video game retailer are currently being sold short, the lowest percentage in more than a decade.
The chain isn't standing still as the industry shifts to digital distribution, and GameStop is doing a lot of things right to hold up better than other retailers of gaming hardware and physical software discs and cartridges. However, the valuation has been out of whack for months, and with short interest at its lowest since 2008 it's going to take a lot of bullish catalysts to keep the party going at this point.
If you're looking for safe stocks, you aren't likely to find them in Madison Square Garden Sports, Carnival, and GameStop this week.
