I've been picking stocks to avoid every week, and I fared pretty well last time. My three stocks to avoid last week were on the move -- down 28%, down 7%, and up 1% -- averaging out to ab 11.3% increase.
The S&P 500 tumbled 2.2% for the week, a relative victory for me and my bearish calls. I have come out ahead in 11 of the past 15 weeks. Let's see if I can keep going. This week I see PepsiCo (PEP 0.30%), Blue Apron (APRN 4.90%), and Robinhood Markets (HOOD 2.14%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
You're not going to find me often singling out blue chip consumer brands here, but among the small handful of companies reporting quarterly results this week, PepsiCo is one that has me concerned the most. The beverage and snacks giant will report fresh financials before Tuesday's market open.
PepsiCo doesn't trip any of the red flags that typically steer me to be concerned heading into an earnings report. PepsiCo has consistently landed ahead of Wall Street profit targets over the past four quarters. However, there are two things that could make the fizz go flat here.
One concern is that a lot of retail food and beverage companies experienced panic buying through the first few months of the pandemic. Folks loaded up on soft drinks and salty snacks as comfort food during the shelter-in-place phase of the pandemic. The 4.8% increase in revenue last year may not seem like a lot, but it's actually PepsiCo's headiest top-line growth since 2011. The 5.3% increase it posted in last year's fiscal third quarter will be tough to top, but analysts see 7% year-over-year gain on Tuesday. Wall Street sees earnings per share climbing 4% for the period. Those forecasts could prove ambitious with panic buying fading as an issue.
The other worry is that we're spending more time away from home right now. We're leading more active lives, and back to actually having social interactions. We're becoming more self-conscious about our appearance, and sugary sodas and unhealthy snacks probably weren't going to be as popular as we worked on beach bodies this summer and spent less time on our couches snacking out as we binge-watched TV.
Shares of Blue Apron have almost doubled over the past month, but those gains don't feel earned. The provider of meal kits was one of the early bottle rockets during the pandemic, as investors figured folks would be eating more at home during the COVID-19 crisis. The initial bullish thesis made sense, but where are we now exactly?
Blue Apron posted back-to-back years of double-digit declines in revenue before a marginal uptick in 2020. After four quarters of growth we saw a year-over-year decline on the top line in its latest quarter. Customers are back to dining out again. There's also a lot of competition out there, including supermarkets rolling out their own gourmet meal kits.
I own shares of Robinhood Markets, but I'm concerned. The online trading platform has seen revenue from stock trades -- what initially put Robinhood on the map -- decline over the past year. Trading in options and crypto is the real driver here, and that's problematic.
Options trading in unseasoned hands can be dangerous strategy. When it comes to cryptocurrency, it has a long way to go before it has the features to take on the competition. The stock's 7% decline last week is bringing it closer to this summer's IPO. It's another rough week away from becoming a broken IPO.
If you're looking for safe stocks, you aren't likely to find them in PepsiCo, Blue Apron, and Robinhood Markets this week.