One bad call can ruin your week. The "three stocks to avoid" in my column last week that I thought were going to lose to the market -- Latch, InnovAge Holding, and Coinbase Gloal (COIN +1.07%) -- fell 7%, soared 46%, and sank 8%, respectively, averaging out to a 10.3% gain.
The S&P 500 experienced a 4.8% move lower, so I was wrong, but I have still been right in 30 of the past 48 weeks.
Now let's look at the week ahead. I see Stitch Fix (SFIX 2.45%), Lennar (LEN 2.25%), and, again, Coinbase as stocks you might want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
Image source: Getty Images.
1. Stitch Fix
Offering stylist-curated outfits by mail hasn't been a very good business model lately. Stitch Fix has posted four consecutive quarters of sharply decelerating revenue growth, clocking in with a decline in revenue in its latest report. This is horrible momentum heading into the fiscal fourth-quarter numbers that it will announce on Tuesday afternoon.
If the business was slowing as we clawed our way out of the pandemic, how do you think Stitch Fix will hold up now that folks are spending less money outside of food essentials? The model has gone through some changes, but it can't seem to gain traction with poorly dressed folks who would appreciate having fashionistas on their side.
The balance sheet is still in decent shape, but analysts don't see Stitch Fix turning a profit until at lest fiscal 2027. With the model being upended, it's hard to picture anything positive emerging out of this week's financial update.
NASDAQ: SFIX
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2. Lennar
Stitch Fix isn't the only company reporting what could be problematic quarterly results. A couple of homebuilders will be reporting results on Wednesday, and Lennar is one that could disappoint the market. The Florida homebuilder has feasted from the red-hot housing market that has been particularly scintillating in the Sunshine State. The near-term outlook won't be so great.
Borrowing costs are rising. The inventory of available homes across the country is shooting higher. Sellers are slashing their asking prices. All three of these new realities will eat into Lennar's business.
The single-digit trailing-earnings multiples you see across the industry are a facade. Analysts already see Lennar's revenue and earnings per share declining 7% and 11%, respectively, next year. It could be a lot worse than that if the real estate market continues to go the wrong way.
This week's report might not be horrible, but its guidance should be cautious -- and that could be enough to spook investors.
NYSE: LEN
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3. Coinbase
Singling out Coinbase as a stock to avoid last week paid off. Shares of the country's leading crypto exchange tumbled 10%, more than double the overall market's slide. I don't usually repeat a pick after it takes a hit, but I think there could be more near-term pain here.
The Merge -- the successful migration of Ethereum (ETH +0.17%) to the more efficient proof-of-stake protocol -- didn't ease the crypto bear market last week. What's the next lever to get digital currencies rolling again? Traders are cooling on Coinbase. The $803 million it generated in revenue in its latest quarter is less than a third (yes, less than a third) of what it served up just two reports earlier.
NASDAQ: COIN
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It's going to be a bumpy road for some of these investments. If you're looking for safe stocks, you aren't likely to find them in Stitch Fix, Lennar, and Coinbase this week.
