Wall Street took a cruel step back last week. I thought my three stocks to avoid for that week -- Stitch Fix, Steelcase, and Carvana -- were going to lose to the market. They fell 3%, rose 25%, and plunged 20%, respectively, for an average gain of 0.7% for the week.
The S&P 500 moved 2.9% lower, so I was wrong. I've still been right in 63 of the past 100 weeks, or 63% of the time.
Let's turn our attention to the current week. I see Opendoor Technologies (OPEN +4.13%), Nike (NKE +0.24%), and Carvana (CVNA +3.27%) 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: OPEN
Key Data Points
1. Opendoor Technologies
The market took a step back last week after the Federal Reserve telegraphed on Wednesday that borrowing costs may remain elevated for a couple of years. With relief in mortgage rates now unlikely for at least another two if not three years, it's not a surprise to see most stocks take a step back last week.
Opendoor Technologies was hit hard. The flipper of residential real estate saw its stock plummet 20%, mirroring the 20% plunge in Carvana, which is also susceptible to a stubborn outlook for loans. The drop was far worse than the general market's 3% slide.
Image source: Getty Images.
Opendoor has shed more than half of its value since hitting a 2023 high last month, but the stock has still more than doubled this year. Yes, Opendoor is now a brutal 93% below the all-time high it hit in early 2021, but that doesn't mean the stock is cheap now, and that's not just because there are a lot more shares outstanding now than there were more than two years ago.
The favorable market for iBuying that blossomed early in the pandemic isn't returning anytime soon. Revenue was cut by more than half in its latest quarter, and that was with a few publicly traded rivals giving up on this niche. It warned this summer that the year-over-year decline will be roughly 70% for the current quarter.
I wrote two weeks ago that Opendoor "could be vulnerable as a high-beta stock if the market takes a step back in the historically weak month of September." It has since shed 32% of its value. A bounce is inevitable, but there will probably be too much selling pressure following upticks until the outlook for existing home resales improves.
NYSE: NKE
Key Data Points
2. Nike
When it comes to athletic footwear, Nike is historically a class act. It's the killer brand with the iconic swoosh logo. However, did you know that it has posted double-digit revenue gains just six times over the past 21 fiscal years? This classic growth stock has actually delivered just a single-digit increase or an actual decline on the top line more than 70% of the time in a fiscal year over the past two decades.
In short, Nike is more mortal than you probably think. It certainly was humbled this summer with its last quarterly report, a rare miss on the bottom line. Its outlook was even worse. Nike reports fresh financials for its fiscal 2024 first quarter on Thursday afternoon, and analysts see revenue growing a mere 2%. Things get even worse on the other end of the income statement, as contracting margins find Wall Street pros now targeting a 20% plunge in earnings per share.
Momentum is not on its side heading into a critical financial report.
NYSE: CVNA
Key Data Points
3. Carvana
If I went in on Opendoor following a 20% hit last week, I may as well stick with Carvana again. The market for used auto sales will recover faster than will big-ticket home purchases. The dynamics that are thinning the supply of available existing homes on the market -- homeowners hesitant to move out of low mortgage rates -- doesn't sting as hard for auto loans.
However, Carvana's stock has fared even better in 2023. The stock is nearly a nine-bagger year-to-date. Analysts see a return to revenue growth next year, but that's if the economy doesn't get worse. The climate for auto loans and delinquency fears will probably only get worse from here.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in Opendoor, Nike, and Carvana this week.
