It goes without saying that last week was pretty brutal for most growth investors. The only problem with my weekly article -- where I single out stocks to avoid -- was that I limit myself to three investments. My three stocks to avoid last week were on the move -- down 23%, down 6%, and down 9% -- averaging out to an 12.7% decline.
The S&P 500 slipped 1.2% for the week, so I was the relative winner with my bearish calls for the seventh week in a row. This week I see GameStop (GME -0.95%), Stitch Fix (SFIX -2.67%), and Marathon Digital Holdings (MARA 7.08%) as stocks that you may want to consider steering clear from this week. Let's go over my reasons for the near-term pessimism.
Last week was rough for meme stocks, and GameStop shares tumbled 14%. I tend to steer clear of stocks with big slides the week before, but I'm making an exception this time. The video game retailer reports financial results for its fiscal third quarter on Wednesday afternoon, and historically it's been a rough event.
GameStop has usually taken a hit the next trading day after reporting quarterly results. It hasn't even been close.
- Nov. 29, 2018: down 6.7% the next day.
- April 2, 2019: down 4.7%.
- June 4, 2019: down 35.6%.
- Sept. 10, 2019: down 9.8%.
- Dec. 10, 2019: down 15.1%.
- March 26, 2020: down 4.3%.
- June 9, 2020: up 2.2%.
- Sept. 9, 2020: down 15.2%.
- Dec. 8, 2020: down 19.4%.
- March 23, 2021: down 33.7%.
- June 9, 2021: down 27.2%.
- Sept. 8, 2021: up 0.2%.
The stock has fallen after posting earnings in 10 of the past 12 reports. It did manage to squeeze out a tiny positive showing last time, but it was double-digit percentage hits the four previous quarters. It seems as if hype can inflate the shares until tangible financial updates crash the party with facts. History won't be on GameStop's side on Thursday, but I will change my mind if we see GameStop move higher following another quarter or two.
The Stitch Fix appeal is obvious. Answer a few questions and stylists backed by algorithms can serve as your fashion-forward outfitters. Most of us have been fine with what we had before through most of the past two years, but it's time to head outside again -- and you're probably two years behind on fashion trends.
The problem for Stitch Fix is that most people don't want to pay a premium for wardrobe assistance, and there's a lot of competition in this thin niche. Stitch Fix is also dealing with slowing growth, supply chain challenges, and rising input costs.
Stitch Fix reports financial results after Tuesday's market close, and expectations are low. Earlier guidance has it targeting revenue growth slowing to a 14% to 17% year-over-year advance, and analysts have been widening the projected quarterly deficit.
This is a dangerous stock to single out here. It can always announce an exciting new initiative or potentially lucrative partnership during Tuesday afternoon's earnings call. The stock is already 80% below its earlier high. Momentum is still a problem, and the near-term challenges to its model are real.
Marathon Digital Holdings
I'm a bull on crypto for the long haul, but there are moments when momentum isn't on your side. We saw most cryptocurrencies sell off late last week. The sting could resonate this week through brokerages specializing in digital currencies and other fintech players with skin in the game, but no one will take a hit as hard as the miners will take.
Marathon has established itself as a leader in Bitcoin (BTC 3.98%) mining. The stock is a seven-bagger over the past year, appreciating by even more than the top crypto denomination itself. It's not profitable, posting a wider loss than analysts were targeting in three of the past four quarters. It's a strong player in this niche -- and trying to tackle the eco-unfriendly knocks on Bitcoin mining -- but if the crypto market is heading lower Marathon is going to be in more pain.
If you're looking for safe stocks, you aren't likely to find them in GameStop, Stitch Fix, or Marathon Digital Holdings this week.