Wall Street proved mortal for the fifth trading week of 2023. My "three stocks to avoid," which I thought were going to lose to the market in the past week -- Tesla Motors, Apple, and 1-800-Flowers.com -- rose 4%, fell 2%, and plunged 12%, respectively, averaging out to an 3.3% drop.
The S&P 500 moved 1.1% lower for the week. I was right. I have been correct in 45 of the past 69 weeks, or 65% of the time.
Let's turn our attention to the week ahead. I see Zoetis (ZTS 3.07%), Tesla Motors (TSLA 0.09%), Applied Materials (AMAT 3.26%) and as stocks you might want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
NYSE: ZTS
Key Data Points
1. Zoetis
One of the more promising trends of 2020 that hasn't panned out for shareholders is the humanization of pets. Adoption rates of dogs and cats soared when the pandemic hit, and savvy investors loaded up on the companies that benefit from a surge in furry friends finding new homes. With a growing number of folks treating their pets like family, it was easy to see the long runway of growth for companies helping families spoil their newfound canine and feline kids.
Zoetis is the leading provider of animal health solutions. We're talking about medicines, vaccines, and diagnostics for pets. It's also a leader in caring for livestock, a stable global business for Zoetis.
Image source: Getty Images.
The stock has paid off nicely over time. It's a five-bagger since going public a decade ago. But the near term has been far more challenging. The shares plummeted 40% as growth slowed dramatically. Revenue rose a mere 1% in its latest quarter, and earnings declined slightly. Zoetis also revised the low-end of its full-year revenue guidance to be a bit lower.
Zoetis reports its fourth-quarter results on Tuesday morning. Analysts see a 2% increase in revenue and a 5% uptick in earnings per share. This is obviously weak for a niche that should be resilient right now, and it gets worse. Zoetis has fallen short of Wall Street profit targets in back-to-back quarters. It's hard to feel optimistic heading into what could be a heartbreaker of a Valentine's Day report.
NASDAQ: TSLA
Key Data Points
2. Tesla Motors
The country's leading maker of electric cars was the lone stock to move higher in last week's list of stocks to avoid. Tesla had a good week. It kicked things off with a pair of analysts jacking up their price target on the shares. CEO Elon Musk, meanwhile, hyped the upcoming March 1 Investor Day presentation.
It wasn't all good news though. The Department of Transportation will be detailing requirements for electric vehicle charges to be eligible for a piece of the $7.5 billion in funding for electrifying infrastructure. If Tesla decides to open up its Supercharger network to other electric vehicles to get in on the infrastructure funding, it will be the end of one of Tesla's strongest selling points.
Tesla shares have nearly doubled since bottoming out last month. The stock has soared despite significant price cuts in its two largest markets. The silver lining to the reductions is that Tesla has the wiggle room to enter with guns blazing into a price war. Legacy automakers with bloated balance sheets and thin margins can't effectively fight that war.
The stock still is ripe for a pullback. It has moved higher in 14 of the past 16 trading days. Tesla will be a dangerous to bet against by the end of this month as we approach its potential needle-moving Investor Day presentation, but for now, we have more than two weeks to go before bumping up against that event.
NASDAQ: AMAT
Key Data Points
3. Applied Materials
Let's close this week's worrywart list with Applied Materials. Like Zoetis, it reports fresh financials this week. As a leading worldwide provider of semiconductor manufacturing equipment, Applied Materials is a proxy for the chip market. It has weathered supply chain disruptions, and now it's facing a potential global recession.
Its near-term prospects are weak. Applied Materials is expected to post modest single-digit growth on both ends of the income statement when it serves up results for its fiscal first quarter of 2023 on Thursday afternoon. And it could get worse from here. Wall Street pros see a 6% decline in revenue on a 13% slide in earnings per share this fiscal year. Analysts see the performance continuing to backpedal in fiscal 2024.
The stock may seem cheap at 17 times forward earnings, but it's at the cyclical mercy of its customers at a hazy time. It's hard to see how Applied Materials could offer a rosy outlook later this week.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in Zoetis, Tesla Motors, and Applied Materials this week.
