The Bear Isn't Dead Yet, According to These 2 Stocks

Investors continued to see a losing streak on Monday, as Wall Street carried forward its downward momentum from late last week. Declines for the Dow Jones Industrial Average (^DJI 0.06%) were once again minimal, but the S&P 500 (^GSPC -0.22%) and Nasdaq Composite (^IXIC -0.52%) declined a bit more sharply.

Data source: Yahoo! Finance.

Many high-profile stocks posted declines on Monday, with varying causes for their poor performance. RH (RH 0.64%) released preliminary results for the holiday quarter that left shareholders of the high-end home furnishings retailer wanting more. Meanwhile, Dell Technologies (DELL -1.04%) joined the growing chorus of companies adding to concerns about the future of the labor market.

RH cuts its guidance

Shares of RH fell 8% on Monday. Shareholders reacted negatively to the company's latest financial update, which anticipated weaker performance than previously expected.

RH communicated its update in a filing with the U.S. Securities and Exchange Commission (SEC). Although there was some ambiguity in the exact language of the filing, it appeared that RH confirmed that it expects its fiscal 2022 revenue to come in at the worse end of its previous guidance, which called for a decline of between 3.5% and 4.5% compared to fiscal 2021. In the same filing, RH found some errors in its calculation of net income per share in its 10-K annual report from last year and its most recent quarterly 10-Q report.

Analysts weighed in with mixed views on RH's future. Analysts at Telsey Advisory downgraded the retail stock from outperform to market perform, although it also boosted its price target by $20 per share to $330. Meanwhile, two other analysts increased their RH stock price targets more aggressively, including Citi going from $305 to $380 per share and Wedbush giving a raise from $270 to $335.

RH hasn't done well in the past year as investors worry that macroeconomic problems will weigh inordinately on the high-end luxury retail specialist. A lot will depend on what happens with economic data and its perceived impact on RH in the weeks to come.

Dell joins the layoff train

In the IT space, Dell Technologies stock finished lower by 3%. The legacy PC manufacturer announced that it would cut costs by letting some of its workers go, joining a growing list of tech companies having made similar moves over the past couple of months.

Dell said that it would cut its workforce by about 5% globally, eliminating about 6,650 jobs across the company. Despite having taken earlier measures like freezing its hiring, the company saw no choice but to take more dramatic steps in order to reduce its overall costs and support its longer-term profitability.

The problem that Dell faces is that its reliance on PCs for a large chunk of its business has been a liability recently. Although PC demand soared during the early stages of the COVID-19 pandemic as people suddenly had to work from home, Dell has seen the market for its key products erode dramatically in recent times.

Valuations on Dell and similarly situated stocks are low enough to look attractive to many investors seeking bargains in today's market. However, those value investors who seek out potential deals have to determine how much earnings could fall from recent levels. What seems like a good value could turn out to be more of a value trap in the long run.