Wall Street moved slightly higher last week. I thought my three stocks to avoid -- Best Buy, Carvana, and Big Lots -- were going to lose to the market in the past week. They rose 5%, soared 9%, and plummeted 21%, respectively. The final result was an average decline of 2.3% for the week.
The S&P 500 inched 0.3% higher, so I was right. I've been correct in 55 of the past 84 weeks, or 65% of the time.
Let's turn our attention to the week ahead. I see Carvana (CVNA +2.62%), Conn's (CONN +0.00%), and Dollar General (DG 3.42%) 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: CVNA
Key Data Points
1. Carvana
Carvana has been one of this year's hottest stocks, up a scintillating 148% in 2023. It may seem to be an odd time for Carvana to catapult onto the list of biggest gainers this year. The seller of used cars may score points for its theatrical ways, but this isn't the best time to be selling secondhand rides.
New cars are now fully available in showrooms. Rebates await buyers of new electric vehicles. It's not just the new-car smell that Carvana is competing against. This is also a battle for thinning expenditures outside of essential purchases.
Image source: Getty Images.
Big-ticket purchases in a climate of rising rates are a dangerous combination. Carvana also isn't helping make its own luck. The car seller has more than $9 billion in debt on its books. Analysts don't see Carvana returning to profitability until 2027, making it a risky play to keep revving in the future.
Unlike the other two names in this week's list, Carvana isn't set to report telltale quarterly results. It put out its most recent financials earlier this month. However, the stock's big run doesn't match its fundamentals.
OTC: CONN
Key Data Points
2. Conn's
A few retailers are reporting financial updates this week, and the most problematic quarterly release could come out of Conn's. The consumer electronics and furniture chain is in trouble. Revenue has declined in five of the last seven fiscal years, and it should be more of that sinking feeling when it announces it fiscal first-quarter numbers on Thursday.
Analysts are bracing for a large loss on a 12% year-over-year slide in sales. Wall Street isn't being overly pessimistic here. Conn's has delivered a larger loss than analyst firms were targeting in the last two quarters. The retailer brought in a new CEO late last year, and obviously things aren't getting any better.
Will Conn's survive? Its burdensome debt isn't very inspiring, and Wall Street pros hoping for the retailer to return to profitability next year just a couple of months ago now don't see that happening until at least three years from now.
NYSE: DG
Key Data Points
3. Dollar General
I fared well last week by picking on a discount retailer reporting earnings in Big Lots. Let's go into the bargain bin again. Dollar General will announce its fiscal first-quarter results on Thursday morning.
Dollar General's reach is substantial. The chain has 19,147 thrift store locations. However, even the deepest of discounters -- hey there, Big Lots -- have stumbled badly in this environment. Consumers are paring back their purchases, and this comes at a time when operating costs for retailers are on the rise.
Analyst estimates have been drifting lower in recent weeks for Dollar General. The retailer has also failed to exceed bottom-line expectations in back-to-back reports. The stock's 1.1% yield isn't going to draw income investors in today's climate, and growth investors aren't going to be wooed by a company posting flat earnings growth on a single-digit uptick in sales.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in Carvana, Conn's, and Dollar General this week.
