In the thrilling world of stock investing, companies continually dazzle us with robust earnings, groundbreaking technologies and an ever-growing base of dedicated consumers. Yet, even amidst this glitter, some begin to lose their luster. As certain companies transition and sometimes falter in their journey, they become evident as stocks to avoid.
Undoubtedly, the United States equity market has been a beacon of optimism this year. With the Nasdaq index surging by an impressive 39% year-to-date, much of its meteoric rise is credited to the marvels of generative AI. Yet, an air of inflation remains, subtly undermining businesses focusing on consumer end-markets. As consumers tread cautiously, the repercussions are evident for investors.
Moreover, the staggering revelation that Americans’ credit card debt surged past the $1 trillion mark paints a sobering picture of our financial condition. Couple this with the direful warnings from major retailers about the challenging market conditions, these are the stocks that must be approached with caution.
Stocks to Avoid: AMC Entertainment (AMC)
In the unpredictable ebb and flow of the stock market, AMC Entertainment (NYSE:AMC) finds itself treading stormy waters. Despite a promising 15.6% year-over-year bump in sales and a commendable net income of $8.1 million in the second quarter, the leading movie theatre chain is grappling with undeniable financial woes. A hefty cash burn of $13.4 million in its operations starkly contrasts its liquidity cushion of $643 million, with the shadow of its $9 billion debt impossible to ignore.
However, in a desperate bid to stay afloat, AMC, in dire straits, plans to sell 40 million Class A shares. Yet, the market’s faith wavers, evidenced by AMC’s stock diving a staggering 78% in a mere month. With a red-inked net income margin of 17.4% and a bleak EBIT margin of negative 5.3%, the financial health diagnosis isn’t encouraging. Furthermore, with Hollywood strikes adding to the fray, AMC’s content lifeline risks growing even thinner.
Beyond Meat (BYND)
Nestled in El Segundo, California, Beyond Meat (NASDAQ: BYND) once took the stock market by storm. Rewind to the 2019 IPO, its shares sky-rocketed from $46 to more than $200 in mere months. Fast forward to July 2021, and BYND’s once-celebrated trajectory has hit a concerning downturn, carving a path that spells “sell” to astute investors.
Moreover, the second quarter financial report revealed $102.15 million in earnings, a disappointing miss by $6.84 million. With disheartening earnings per share plunge to -83 cents, the only bright aspect was halving their net loss year-on-year. Additionally, the plant-based meat arena’s accessibility draws in new competitors at dizzying speeds, eroding BYND’s once-defining edge. On top of that, consumer interest declined, with a recent report showing a 39% decrease in U.S. retail sales and a 16% international drop.
Furthermore, a forward price-to-sales ratio at 1.79, 56.7% above the sector median, and TipRanks analysts forecast an alarming 16% downside. The horizon looks cloudy for Beyond Meat. Cleary, this has earned its spot on our list of stocks to avoid.
Dish Network (DISH)
In the fast-evolving digital landscape, Dish Network (NASDAQ: DISH) stands as a stark reminder of days long past. Once a titan in the satellite TV domain, it’s grappling with a landscape where such technology feels almost antiquated amidst prevalent 5G networks. Consequently, this transition from relevance presents a daunting challenge for Dish.
Moreover, the company’s pivot to streaming, marked by its acquisition of Sling TV, hasn’t brought respite. Sling hemorrhaged 97,000 subscribers in the second quarter, bottoming at a five-year low of two million. The woes extend to Boost Mobile, another Dish entity, which reported a loss of 188,000 subscribers. Additionally, with Dish’s stock plummeting 62% year-over-year, the future looks bleak for its market recovery prospects.
Furthermore, given these patterns and the overwhelming shift to streaming, Dish Network’s prospects as a thriving 5G wireless service provider seem uncertain, positioning it as one of the potential stocks to avoid.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines