Wall Street took a breather last week. The "three stocks to avoid" in my column that I thought were going to lose to the market last week -- Coinbase, Baozun, and AeroVironment -- fell 16%, rose 14%, and tumbled 11%, respectively, averaging out to a hearty 4.3% decline.
The S&P 500 experienced a 3.4% move lower. I was barely right. I have been correct in 38 of the past 60 weeks, or 63% of the time.
Now let's look at the week ahead. I see Lennar (LEN 0.92%), Baozun (BZUN 5.17%), and Scholastic (SCHL -0.20%) 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. Lennar
Homebuilders were feasting in the last few years as low mortgage rates and a resilient economy pushed new home prices higher. Where do we go from here? Lennar is a leading property developer of residential properties in the popular Sun Belt. Growth has been impressive, but the near-term outlook has to be concerning.
We're seeing home prices in some of the hottest markets start to buckle. As a major developer, Lennar has ways to make financing easier on its customers, but it can't compete with the cascading prices of inflated resale properties.
Analysts are holding out for a strong financial update when Lennar reports its third-quarter results after the market close on Wednesday. They are bracing for a 20% increase in revenue and a 26% surge in earnings per share. The rub is that sentiment for the real estate market has soured quickly in recent months. Even if Lennar announces a beat on both ends of its income statement it will likely have a more conservative outlook. Is its order backlog slowing in light of waning demand and an uptick in cancellations? It's going to be a challenging report.
2. Baozun
I've been burned by singling out Baozun in back-to-back weeks. The stock soared 26% two weeks ago even though the company posted disappointing financial results. It soared another 14% this week, as China eased COVID-19-related restrictions.
The bullishness appears overdone. Baozun's third-quarter results featured a small adjusted loss on an 8% slide in revenue. China starting to lift stay-at-home orders and folks getting back to work can help, but it's not enough to turn Baozun's fortunes around. Its business helps global brands develop an online presence in China, but the country still hasn't won back the confidence of foreign companies. Baozun's business is likely to continue to be under pressure, and it won't take much to lose at least some of the 44% pop it scored over the past two weeks.
3. Scholastic
Lennar isn't the only potentially problematic earnings report during this otherwise quiet week of financial updates. Scholastic hopes to make the grade on Thursday, but let's not assume that it will go to the head of the class.
Scholastic provides schools with books and other learning solutions. It also is the leading player in book fairs. Remember those? Are you surprised to see that it's still a thing when students have so many other ways to entertain themselves after the end of the school day?
Revenue growth bounced back last year, after back-to-back years of double-digit declines in sales -- but top-line gains are slowing again. Revenue rose a mere 1% in its previous report. Scholastic has made some smart moves to stay relevant, acquiring new platforms and providers of next-gen learning solutions, but that's probably not going to be enough.
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 Lennar, Baozun, and Scholastic this week.
