The market's moving, and that's just fine for this weekly column that singles out three stocks that I expect to lose to the market in the week ahead. My three stocks to avoid last week were on the move -- as AT&T, MicroStrategy, and VF, were down 5%, 10%, and 7%, respectively -- averaging out to a 7.3% decline.
The S&P 500 bounced back to rise 0.8% for the week, so I won last week. My bearish picks have now lost to the market in 14 of the past 15 weeks. This week, I see Royal Caribbean (RCL 1.47%), Spotify (SPOT -0.27%), and Despegar.com (DESP 1.88%), as stocks that you may want to consider steering clear from. Let's go over my reasons for the near-term pessimism.
Image source: Getty Images.
Royal Caribbean
With all of the setbacks facing the cruising industry these days, it may be surprising to see Royal Caribbean checking in somewhat in ship-shape. The stock is trading higher than where it was two months ago, even as many growth stocks got rocked in that time and the omicron variant has gotten in the way of some scheduled sailings.
Royal Caribbean is the best of the publicly traded cruise line operators. The brand has a loyal following, and it has historically posted the healthiest margins in the industry. However, it seems as if there's a full recovery being priced into the shares when there are a lot of unknowns.
We'll get a good taste of how Royal Caribbean is holding up with recent onboard outbreaks in the industry when it reports financial results on Friday morning. It won't be pretty. Royal Caribbean is expected to post its eighth consecutive massive loss. Making matters worse, it has posted a larger-than-expected deficit in back-to-back reports heading into Friday's conversation with the investing community. With the recent surge in COVID-19 cases likely causing more people to reconsider sailings in the near term, it could be a problematic report.
Spotify
Speaking of problematic reports, Spotify announces its fourth-quarter results after Wednesday's market close. The fresh financials themselves won't be all that impressive. Analysts see another quarterly loss on a modest 16% increase in revenue. However, the real reason Spotify will have to face the music on Wednesday is that its programming is causing some unrest.
The situation started innocently enough late last week. Neil Young threatened to pull his music as a result of what critics call vaccine misinformation coming from The Joe Rogan Experience podcast on Spotify. The service stood by Rogan's right to express his opinions, and Young's music was pulled. Joni Mitchell and Nils Lofgren have also requested to have their catalogs pulled from the platform in support of Young's battle against Rogan's vaccination rhetoric.
Spotify is between a rock artist and a hard place. It paid Rogan $100 million two years ago to be the anchor of its podcast movement, but now it's losing musical artists. Consumers lose when artists with deep catalogs bow out of the platform, but Spotify would also alienate Rogan's core fans -- and others who agree with his views -- if he got the hook. It's a lose-lose situation for Spotify, and it's probably going to lose subscribers no matter how this plays out.
Despegar.com
One of last week's biggest winners was Despegar.com. The Latin American travel portal saw its stock soar more than 20% higher last week, fueled by an analyst upgrade. Citi analyst Sergio Matsumoto stuck to his earlier price target of $15, but with the share price buckling below $10 earlier in the week it was time to bump that hold rating up to a buy.
The analyst feels that the omicron's impact on the travel industry within Latin American will be limited to the first quarter, and that the portal's long-terms earnings power actually improved from where it was before the pandemic arrived. It's high praise, but the stock could be ripe for some profit-taking after a big move higher last week.
If you're looking for safe stocks, you aren't likely to find them in Royal Caribbean, Spotify, and Despegar.com this week.
