Blue-chip stocks typically make for solid long-term investments. These are stocks of companies that have been around for years, have well-known brands and products, are profitable, and have a track record of rewarding shareholders with dividends and share buybacks. However, not all blue-chip names have done well coming out of the Covid-19 pandemic. Stocks of many household names have struggled with issues ranging from declining sales and high inventory levels to the cyclical nature of the economy and a slowdown in consumer spending. A few blue-chip companies have recently flashed significant warning signs to investors, making them a security best avoided. Here are three blue-chip stocks giving off major red flags.
Krispy Kreme (DNUT)
Its doughnuts might be delicious, but that doesn’t mean Krispy Kreme (NASDAQ:DNUT) is a good stock to own. This is according to analysts at JPMorgan Chase (NYSE:JPM) who have just downgraded DNUT stock to “neutral” from a previous “overweight” (buy equivalent) rating and maintained a $13 price target on the stock, which is where the shares are currently trading. While JPMorgan notes that Krispy Kreme remains a beloved brand with a loyal following, it has concerns about the company.
JPMorgan says the downgrade comes after a series of poor earnings reports from Krispy Kreme. The company continues to struggle with the execution and implementation of its business plan. The analysts also note a lack of consistency, saying that packages of doughnuts don’t always contain products made within the last 24 hours, as is claimed. Krispy Kreme is also dealing with concerns about weight loss drugs and views that they will hurt snack and beverage sales. DNUT stock has fallen nearly 20% over the past 12 months.
Canada Goose (GOOS)
The latest blow to luxury parka maker Canada Goose (NYSE:GOOS) is that its chief financial officer (CFO) Jonathan Sinclair quit. The retailer named Neil Bowden, its Deputy Finance Chief, the new CFO. The executive change was announced on the same day that Canada Goose lowered its annual sales forecast, citing continued weakness in the key markets of China and the U.S. The company said that hopes for a sustained recovery in China remain uncertain.
Specifically, Canada Goose said that it now forecasts fiscal 2024 revenue of $1.20 billion to $1.40 billion, down from previous guidance of $1.40 billion to $1.50 billion. The stock dropped nearly 10% on news of the lowered guidance and new CFO. Year-to-date, GOOS stock is now down 40% and hovering near an all-time low of just under $10 a share. Some analysts say this Goose is cooked due to a growing lack of demand for winter parkas in a world that is warming due to climate change.
Walmart’s (NYSE:WMT) stock is down 8% since the company issued its third-quarter financial results and issued guidance that Wall Street did not want to hear. Yes, the world’s largest retailer managed to top analyst forecasts. But the company also gave a cautious outlook for the holiday shopping season, sending its share price sharply lower as a result. Walmart said that it is seeing signs of consumer spending weakening heading into the crucial year-end holidays as the broader economy slows.
The company, which is viewed as a bellwether for the economy and consumer sentiment, said it now expects earnings per share (EPS) of $6.40 for all of this year, which is below the $6.48 that analysts wanted to see from Walmart. The grim outlook portends bad things for Walmart’s future earnings and potentially for the economy. Some analysts said that Walmart’s poor forecast is an indication that the economy is headed into a recession next year. WMT stock is up 3% over the last year.
On the date of publication, Joel Baglole 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.