The stock market is a fickle thing. One moment it loves you, the next moment you're out of favor. That's precisely what's troubling these four stocks. In the not-too-distant past, these darlings of the market are now watching as their stock prices crash.
Making the matter more perplexing, each of these stocks delivers prolific revenue growth. Let's look at each to discern a pattern and common theme.
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AMC Entertainment Group
AMC Entertainment Group (AMC -10.08%) is well known to investors in the U.S. market. The company played a significant role in the meme-stock frenzy of 2021. AMC's stock price rose more than 1,000% in 2021. But the new year has been a new story, and the stock is down 48% year to date.
Interestingly enough, revenue is surging, expanding from $162 million to $1.2 billion year over year in its quarter ended Dec. 31 as economies reopen and people go out again. That said, it hasn't been enough to stem losses on the bottom line, which continue despite the revenue growth.
DraftKings
DraftKings (DKNG -3.10%) is an internet gambling company that offers daily fantasy sports, mobile sports betting, and iGaming. At the pandemic's onset, it became a market favorite as investors rightly speculated that consumers unable to visit casinos in person would visit online gaming sites more often. Indeed, revenue grew by 90% in 2020 and 111% in 2021.
Like AMC, DraftKings is seeing its shares crash in 2022, down 42% year to date. Similarly, DraftKings is unprofitable as it expands into new jurisdictions and acquires customers before they join competitors.
Skillz
Skillz (SKLZ -1.87%) is a unique gaming company. It offers customers an opportunity to wager on the games played. What makes Skillz different from DraftKings, which is regulated as a gambling company, is that games on its platform are based on skill. Of course, games are more fun when you get a tangible benefit for winning, and Skillz's revenue grew 92% in 2020 and 67% in 2021.
The company and its stock thrived at the pandemic's onset as folks looked for at-home entertainment options. However, the stock is experiencing an epic reversal and is down 70% in 2022. Like DraftKings, Skillz is unprofitable on the bottom line as it invests aggressively in sales and marketing.
fuboTV
fuboTV (FUBO -0.81%) is a sports-centric alternative to cable TV. Like other digital entertainment companies, it thrived at the pandemic's onset as folks spent more time at home. Impressively, fuboTV has kept up the momentum even as economies reopen. The company nearly tripled its revenue in 2021 to $631 million.
That has not stopped the market from sending its stock crashing down 58% in 2022. It, too, is unprofitable on the bottom line as it offers consumers a robust content slate at prices too low to recoup its costs.
The common theme
Each of these businesses has in common fast-growing revenue and lack of profitability. The market has shown a distaste for unprofitable growth stocks as interest rates rise and future cash flow is valued less.
One of two factors could push these stocks higher: interest rates move meaningfully lower, or the companies demonstrate significant progress toward profitability. Otherwise, their stocks could continue hitting the ceiling despite rapid revenue growth.
