Last week ended with a bang. The market rallied following potentially encouraging inflation news, and it was off to the races for depressed equities. The "three stocks to avoid" in my column last week that I thought were going to lose to the market --Yeti Holdings (YETI +0.80%), Redfin (RDFN +0.00%), and Blink Charging (BLNK 3.61%) -- rose 39%, 30%, and 11%, respectively, averaging out to a 26.7% ascent.
The S&P 500 experienced a 5.9% move higher. I was very wrong. I have still been right in 35 of the past 56 weeks, or 63% of the time.
Now let's look at the week ahead. I see Coinbase (COIN +1.20%), Despegar.com (DESP +0.00%), and Bowlero (BOWL +0.00%) 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. Coinbase
One of the big stocks that didn't rally last week was Coinbase. However, it's surprising that shares of the country's leading crypto exchange suffered only a 2% decline for the week. Many of the leading crypto denominations have plummeted roughly 20% in value over the past week, and another Coinbase rival came undone last week.
Some might argue that FTX's Chapter 11 bankruptcy filing benefits Coinbase. I don't see it that way. Coinbase has proved that it's financially stable, but it's not as if FTX customers will flock to Coinbase to open new accounts. Every platform that folds is bad news for Coinbase. Do you think folks who saw their assets incinerated on FTX, Celsius Network, Voyager Digital, and other platforms will come back to crypto? Even if they get some of their money back -- a dicey proposition right now -- are they going to play with fire again?
Patrons who turned to the bankrupted platforms did so chasing higher yields and lower commission rates than Coinbase. They're not going back to digital currencies. Once bitten, twice fiat? The crypto market also got smoked as stocks started to rally. Remember when cryptocurrency was supposed to be an inflation hedge? Coinbase held up better than the crypto market last week, but that won't be the norm.
It was already fading in 2022, as monthly transacting users and trading volume have declined sequentially for three consecutive quarters. Customer assets on Coinbase have plunged 64% through the first nine months of the year. Coinbase isn't a flight to safety in the crypto market. The airport is closed.
NASDAQ: COIN
Key Data Points
2. Despegar.com
Speaking of closing airports, the travel industry had a long way to crawl back from the initial pandemic hit. And now global economic headwinds threaten to derail the recovery. Things are even harder in Latin America, and that's the backdrop heading into travel portal Despegar.com's third-quarter report that will be announced on Thursday morning.
The Argentina-based travel site has struggled on the bottom line even as its top line benefited from easy year-over-year comparisons. Despegar has posted larger than expected losses in each of its past four quarterly reports. Profitability has proved elusive, and the weakening outlook for the global economy isn't going to help travel in and out of Latin America.
NYSE: DESP
Key Data Points
3. Bowlero
Let's start with what I like about Bowlero. Bowling is fun, and the world's largest operator of bowling alleys is making the most of the highly fragmented industry by snapping up smaller rivals. Now let's turn to why Bowlero is on this list. It reports fresh financials on Wednesday afternoon, and like Despegar.com it has fallen short of market expectations lately.
Bowlero has missed analyst profit targets for three straight quarters, but somehow the stock hit an all-time high during Thursday's market rally. It doesn't "strike" me as rational that the market should "spare" this consumer-facing company from the slump that most leisure players are experiencing. Even though it's a serial buyer of indie alley operators to pad its organic growth, analysts see just 11% in top-line gains this year -- slowing to 7% next year. The stock has been rolling in 2022, but just wait until the bumpers go away.
NYSE: BOWL
Key Data Points
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 Coinbase, Despegar.com, and Bowlero this week.
