Wall Street was bounced back after a flat week. I thought my "three stocks to avoid" -- Altria (MO +2.08%), Intel (INTC 5.69%), and MicroStrategy (MSTR 0.72%) -- were going to lose to the market in the past week. They rose 3%, 3%, and 13%, respectively. The final result was an average gain of 6.3% for the week.
The S&P 500 inched 0.9% higher. I was wrong, but I have still been right 51 of the past 80 weeks, or 64% of the time.
Let's turn our attention to the week ahead. I see MicroStrategy (MSTR 0.72%), Cinemark Holdings (CNK 2.02%), and Ford (F 0.45%) 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: MO
Key Data Points
1. MicroStrategy
MicroStrategy was the biggest gainer of the three stocks I figured would lose to the market last week, as it soared 13% following a bullish analyst initiation and the buoyant price action of Bitcoin (BTC +2.33%). Mark Palmer at Berenberg kicked off coverage of the crypto-hungry provider of business intelligence software solutions with a buy rating. His $430 price target implies 31% of near-term upside.
Palmer sees MicroStrategy as a compelling way for stock investors to take advantage of this year's rebound in cryptocurrency prices. He points out that Bitcoin is up 139% since MicroStrategy began investing in Bitcoin, making it the largest corporate holder of the world's most popular crypto denomination.
Image source: Getty Images.
Missing in Palmer's praise is that a lot of MicroStrategy's purchases happened at higher levels than today's current market rates. MicroStrategy has invested $4.2 billion in the last three years for 140,000 Bitcoin that is currently worth $4.1 billion. It's essentially marching in place.
Adding insult to injury, MicroStrategy reports quarterly results after Monday's market close. Its underlying business has been a dud. Wall Street pros see a loss on flat revenue growth in this week's update. The sleepy performance has been par for the course at MicroStrategy. Revenue growth has been negative in all but one of the past eight years. Financing crypto purchases has turned heads at the company given its $6.7 billion enterprise value backed largely by Bitcoin. However, with longtime CEO and Bitcoin cheerleader Michael Saylor finally stepping down last year and financing rates rising, it's hard to get excited about MicroStrategy until it focuses on turning its real business around.
NASDAQ: INTC
Key Data Points
2. Cinemark Holdings
The multiplex industry is showing signs of life in 2023. The country is still not at pre-pandemic levels in terms of audiences, but folks are coming back to the local cinema to catch highly anticipated flicks. The country's two most valuable publicly trading theater chains will report quarterly results on Friday morning, so let's screen the trailer for Cinemark's fresh financials.
The early read is positive. Analysts see Cinemark's deficit cut in half on a 24% increase in revenue for the fourth quarter. But Wall Street has been burned before. Cinemark has posted a larger than expected loss in each of its last four financial reports.
Box office receipts for domestic theaters are still down 25% year-to-date compared to 2019 and 33% below where 2018 was at this point. However, folks are spending more at the high-margin concession stands than they were before. It should be a decent report, but Cinemark stock has already nearly doubled this year. Is Cinemark's 95% pop this year justified? It's a cliffhanger that will be resolved by the end of this week.
NASDAQ: MSTR
Key Data Points
3. Ford
Another company revving up with earnings news this week is Ford. The popular automaker is expected to clock in with revenue and earnings per share rising 12% and 8%, respectively. Analysts see Ford tapping the brakes after that, modeling just a 3% increase on the top line and profits actually declining for all of 2023. Those same pros see revenue growth decelerating to a 2% increase next year.
Most companies have seen profit targets revised higher over the last three months, but Ford's going the other way. There's a price war for electric vehicles. An iffy economy and rising borrowing costs make this a challenging time to move new cars out of the showroom. The stock's juicy 5.2% dividend yield might not be sustainable if the bottom line contracts from here, and it did disappoint investors with its last quarterly report.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in MicroStrategy, Cinemark, and Ford this week.
