Wall Street took a step back last week. I thought my three stocks to avoid for that week -- Nvidia, Affirm, and American Eagle Outfitters -- were going to lose to the market. They fell 6%, rose 3%, and tumbled 8%, respectively, for an average drop of 3.7% for the week.
The S&P 500 moved 1.3% lower. So I was correct. I've been right in 62 of the past 98 weeks, or 63% of the time.
Let's turn our attention to the current week. I see Opendoor Technologies (OPEN +0.83%), Adobe (ADBE 6.82%), and Cracker Barrel Old Country Store (CBRL +0.47%) as stocks you might want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
NASDAQ: NVDA
Key Data Points
1. Opendoor Technologies
One of this year's biggest surprises is the wealth-altering success of owning Opendoor Technologies. The flipper of residential real estate has more than tripled in 2023, and that was even with a negative market reaction to last month's second-quarter performance. Shares of the iBuying specialist tumbled 24% last month.
The real estate market isn't at its best right now. High interest rates are making homebuyers reluctant to sell or refinance their homes, knowing that they will face much higher mortgage financing rates following the transaction. This is benefiting real estate developers building new homes to sell, but it's a drag for Opendoor and the thinning herd of players still trying to buy existing homes and sell them later at a profit.
Image source: Getty Images.
Opendoor's revenue is declining, and the avalanche is picking up the pace. Revenue has fallen by 25%, 39%, and 53% in its latest three quarters, respectively. Its doing a good job of keeping its costs in check to help improve its margins, but the flurry of top-line activity continues to be a problem. Its guidance last month called for revenue to clock in at a year-over-year plunge of 70% to 72% in the current quarter.
I believe in the long-term potential for Opendoor to come out ahead. It has outlasted many rivals, leaving it in the pole position to win this race when mortgage rates retreat sharply in the future. But right now it seems as if this year's gains aren't warranted. It could be vulnerable as a high-beta stock if the market takes a step back in the historically weak month of September.
NASDAQ: AFRM
Key Data Points
2. Adobe
I sometimes turn to upcoming earnings reports to find potential candidates for this list, and Adobe is reporting fresh financials on Thursday afternoon. In the desktop publishing software giant's defense, it doesn't have many of the red flags that I typically see in a potential disappointment.
Analysts' profit estimates -- for its latest quarter as well for the year ahead -- have been inching higher in recent weeks. It has landed ahead of those forecasts consistently over the past year. However, Adobe's revenue growth is slowing. Adobe's top line rose at its weakest clip in eight years in 2022. It's growing even more slowly in 2023. The earnings beats are also not that impressive, beating Wall Street pro projections by just 2% or 3% over the past year. With the stock up 67% this year it can't afford to put up merely ho-hum financial results this week.
NYSE: AEO
Key Data Points
3. Cracker Barrel Old Country Store
There's some retro rustic charm at Cracker Barrel, but a success story late in this earnings season isn't likely to be on the menu. Cracker Barrel reports financial results on Wednesday morning for the fiscal fourth quarter that ended in late July. It's not shaping up to be a great report.
Analysts see revenue and earnings growing a mere 2% and 3%, respectively, for the quarter. Cracker Barrel has fallen short of Wall Street profit targets in two of the past three quarters, and it gets worse: At least three analysts have lowered their price target on the stock last week. When three firms get skittish heading into a seasonally potent financial update, that's a troublesome sign. Channel checks suggest a sluggish summer for the company specializing in comfort food and their attached gift stores.
Cracker Barrel introduced a new CEO this summer, but it's too soon to see if she can turn things around. She has arrived too late to save Cracker Barrel's latest quarter at least.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in Opendoor, Adobe, and Cracker Barrel this week.
