3 Stocks to Avoid at All Costs
Posted On January 16, 2020 2:12 pm
As the stock market marches ever higher, it’s been harder and harder to find reasonably valued equities to purchase. Some stocks have been beaten down unfairly, while others are on the verge of turnarounds and present buying opportunities.
None of the stocks featured below fit that description and you would be well served to avoid them.
1. GameStop: Smackdown in the Video Game World
GameStop‘s (NYSE:GME) third-quarter loss, reported on Dec. 10, was wider than expected, and revenue fell short of expectations. Guidance for the full year assumed a decline in same-store sales in the high teens, compared with a Wall Street analysts’ consensus for a decline of just 0.3%.
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GameStop shares have fallen about 65% over the past year as the retailer continues to struggle for survival. Customers are downloading video games at home instead of purchasing in stores. Even its pre-owned game business is suffering as digital availability has grown.
In June, Gamestop eliminated its dividend, triggering a 35% stock-price decline, its worst-ever one-day sell-off.
Seth Sigman, writing on behalf of the Credit Suisse analysts, explained in an investor note:
Looking out, not only is it difficult to see how results will improve in a new cycle (after all, the last cycle didn’t seem to stimulate enough software/pre-owned), but what happens between now and then is more concerning. Guidance for 2019 was lowered to a shocking level and there seems to be little if any near-term visibility.
When new game consoles are released around the 2020 holiday shopping season, Gamestop may warrant another look. But until then, there’s absolutely no reason to invest.
2. Six Flags: Skip This Thrill Ride
Six Flags Entertainment (NYSE:SIX) issued bad news on Friday, Dec. 10, and experienced one of the biggest stock-price drops in its history.
The company said it now anticipates fourth-quarter revenue declines of $8 million to $10 million below the comparable quarter last year. A Securities and Exchange Commission 8-K filing said: “North America parks experienced lower attendance in the fourth quarter vs. the same period in 2018 due to softer than expected season pass and membership sales, primarily during the holiday sales periods.”
The 8-K also disclosed that the development of the Six Flags-branded parks in China has not gone according to plan. The company said its partner in China, Riverside Investment, has faced “severe challenges” due to the macroeconomic environment and China’s declining real estate market.
“This has led Riverside to default on its payment obligations to the company and, as such, the Company has delivered formal notices of default under its agreements,” Six Flags stated in the filing. “While the Company continues to work with Riverside and each of Riverside’s governmental partners, the eventual outcome is unknown and could range from the continuation of one or more projects to the termination of all the Six Flags-branded projects in China.”
Six Flags won’t realize any revenue from the China agreements. The company expects… Continue reading at The Motley Fool