I looked at three stocks to avoid last week, and all three investments did wind up moving lower. The stocks fell between 3% and 27%, with an average decline of 11%. It wasn't easy. One of the three was trading as much as 16% higher on Monday but succumbed to sanity and gravity. The 11% average slide looks even better with the general market moving slightly higher for the week.
It's a new week, so I have three new stocks that are blinking amber. I see Snap (NYSE: SNAP), GoPro (NASDAQ: GPRO), and Moderna (NASDAQ: MRNA) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Image source: Getty Images.
There will be hundreds of companies reporting quarterly results this week, and Snapchat's parent company is the one that worries me the most. The social snapshots platform had healthy momentum heading into the pandemic, but it's not going to be immune to some shortcomings.
Snap's first quarter was strong. Revenue rose 44% on the strength of its 20% year-over-year increase in daily active users and a similar 20% surge in average revenue per user (ARPU). We won't be seeing a repeat performance on Tuesday afternoon. Usage growth has probably slowed at this point, especially with Tiktok continuing to gnaw at Snapchat's key youthful demographics audience. Instagram and its parent company also have a few tricks up their sleeve to keep Snapchat in check.
ARPU will be a bigger problem. Advertising dollars have slowed in the current climate, and some marketers are swearing off social media in general. Snap's ARPU growth was already decelerating in each of the past four quarters, and it will probably clock in negative for the current quarter. The stock has more than tripled since its pandemic low, making it vulnerable to a less-than-perfect report.
Like a GoPro action camera pointing the wrong way, this is a company known more for the shots it missed than the ones it made. GoPro went public with dreams of becoming a content company, but that didn't pan out. It tried to cash in on the drone craze, but that fantasy crashed and burned. It's been banking on its wearable action cameras, and that's not as trendy a niche as it was in the past.
Revenue has declined in three of the past four years for GoPro. It had a strong holiday quarter last year, but its top line suffered a larger than 50% decline the period before and the period after that standout showing. Wall Street's bracing for another rough quarterly report on Aug. 6.
GoPro is doing a few things right. It's growing its GoPro Plus subscription service, but not to the point where it's moving the needle. It's also raising the bar in action camera tech, introducing a software update earlier this month to give its flagship camera the ability to also function as a webcam. GoPro continues to dominate the action camera niche in this country, but it's not much of a market with cheaper imports available as we head into a recession and smartphone cameras that are getting better and more durable.
If I'm ever wrong about singling out a stock to avoid, I hope it's this one. Anything that can make the old normal the new normal again is hard to bet against. Moderna has nearly quintupled this year -- soaring 51% higher this past week alone -- on the promise of its COVID-19 vaccine candidate. It enters phase 3 trials later this month.
It's not the only player closing in on a potential vaccine. We may wind up with several imperfect vaccines from several different companies. Even if Moderna nails it, warranting a 398% stock increase this year is a tough call. There's also been a lot of insider selling on the way up, and that's always something to consider before buying into the promising upstart.
If you're looking for safe stocks, you aren't likely to find them in Snap, GoPro, and Moderna this week.
10 stocks we like better than GoPro
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and GoPro wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 2, 2020
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.