Three Stocks to Avoid or Sell Next Week

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March 25, 2023

Seeking out great stocks to buy is important, but identifying quality investments is only half the battle. Many would say it’s just as essential for investors to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. So, figuring out which stocks to trim or get rid of is essential for proper portfolio maintenance.

Even the best gardens need pruning, and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week.

Palantir (PLTR)

Some data points from Palantir’s fourth-quarter results indicate that, despite businesses and governments’ increased embrace of AI in recent months, the company’s growth is slowing a great deal. In Q4, the company’s U.S. revenue increased just 1.7% versus the previous quarter to $302 million. And its overall top-line growth slowed to 18% year-over-year in Q4, down from 22% in Q3.

On a positive note (snicker), after nearly 20 years of existence, the company generated its first quarterly profit, as it reported a Q4 net income of $31 million or 1 cent per share. However, its operations still generated an $18 million loss, with its operating margin at a discouraging -4%.

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Big Lots (BIG)

Shares in the big box retailer may be down by nearly 71% over the past 12 months. Its 10.82% dividend yield is still tempting some investors. However, with the company reporting a net loss of $7.30 per share and expected to stay in the red through 2024, it’s highly questionable whether BIG’s high rate of payout will continue for long.

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Black Hills Corporation (BKH)

Natural gas producer Black Hills Corporation reset its growth outlook lower after reporting disappointing Q4 results, slashing its 2023 EPS view to $3.65-$3.85 from $4.00-$4.20. The revision was driven by a rapid shift in macroeconomic factors, including elevated natural gas price volatility and higher natural gas demand driven by winter storm Elliot in December 2022. With elevated natural gas price volatility, higher interest rates, and general inflationary pressures forecasted through 2024, Black Hills is only expected to grow earnings by 2% in 2024 and 4% in 2025.

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Three Stocks to Watch for the Week of March 27th

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Editorial Staff

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March 26, 2023

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Stocks oscillated between gains and losses last week but closed modestly higher amid concerns over the banking system, Fed outlook, and recession risks. The S&P 500 added 1.37%, the Dow rose 1.15%, and the Nasdaq finished the week 1.81% higher.

This week, we’ll receive the latest updates on home prices, with the Case-Shiller National Home Price Index for January. Investors will also find out if inflation extended its uptick into February with the release of the Federal Reserve’s preferred gauge for checking prices. The most recent report showed that the Personal Consumption Expenditures Price Index rose 0.6% in January, marking the most significant month-to-month increase since last June.

Growth stocks got hammered in 2022, but investors want a fresh start in 2023. If you believe in the buy-low, sell-high philosophy, you may want to read ahead. Our first recommendation was one of the biggest losers in 2022 as the inflation rate skyrocketed against historical norms. According to some of the pros, this stock is undervalued and poised for resurgence.

Match Group (MTCH)

The pandemic provided a bump in online dating and sent MTCH stock price soaring, reaching its ATH of around $169 in October 2021. Since the share price has lost nearly 75% of its value, but the global, fundamental need to meet people isn’t going anywhere. Match benefits from inelastic demand, compared to other consumer discretionary names. Which the company intends to continue capturing with its technologies, including Tinder, OkCupid, and Hinge, providing a solid and resilient subscription-based business. MTCH has a consensus Buy rating. A $60 price target implies a 50% upside.

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Uber Technologies (UBER)

The global ride-sharing market is expected to grow from $84.30 billion in 2022 to a whopping $242.73 billion in 2028, representing a Compound Annual Growth Rate (CAGR) of 16.3% over the next six years. Uber stands out as a clear winner in the ride-sharing race based on profit growth and current valuation.

Uber’s gross bookings rose 28% in 2022, down from its 56% post-pandemic growth in 2021, and it expects just 17%-21% year-over-year bookings growth in the first quarter of 2023. However, its adjusted EBITDA improved from a loss of $774 million in 2021 to a profit of $1.7 billion in 2022. It also expects to post a positive adjusted EBITDA of $660 million to $700 million in the first quarter. The impressive profit growth can be attributed to its cost-cutting measures and rising take rates across its mobility and delivery businesses.

For the full year, analysts expect Uber’s revenue to increase 16% to $36.9 billion as its adjusted EBITDA rises 86% to $3.2 billion. Based on those estimates, its stock trades at just two times this year’s sales and 21 times its adjusted EBITDA. It’s also still trading nearly 25% below its IPO price. 41 0f the 46 analysts offering recommendations say to Buy Uber stock. A median price target of $47 represents an increase of 50% from the current price.

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UPS (UPS)

UPS stands to benefit from the current global supply chain disruptions, as the company’s expertise in logistics and supply chain management makes it well-positioned to navigate these challenges. As consumers increasingly turn to online shopping and same-day delivery options, UPS is poised to capitalize on these trends and continue its strong growth trajectory. With a 3.51% yield to sweeten the deal, it’s attractive to investors looking for stocks to hold long-term.

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Two Biotech Stocks to Buy in 2023 and One to Avoid

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Editorial Staff

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January 6, 2023

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Some experts say we’re in “the golden age of biotechnology.” Scientific advances are opening up possibilities for the treatment and prevention of diseases that could only have been imagined in the past.

This golden age is also presenting tremendous opportunities for investors. Biotech stocks offer the potential for huge gains. However, losing biotech stocks can rapidly eat away your precious long-term returns. So, determining which biotech stocks are best positioned and which to steer clear of is essential.

This list will cover two biotech names that look like good options to move significantly higher in 2023 and one that seems too risky to get involved with.

Drugmaker, Viatris’ (VTRS) portfolio currently comprises more than one thousand approved molecules across a wide range of critical therapeutic areas, including globally recognized iconic and key brands, generic, complex generic, and biosimilar products. Branded products include EpiPen, Amitiza, Lipitor, and Viagra. Its biosimilar portfolio includes pegfilgrastim, trastuzumab, and adalimumab biosimilars.

Viatris is profitable, but it is looking for more growth. The company reported revenue of $4.1 billion in the third quarter, down 10.1% year over year. Adjusted earnings came in at $0.87 per share, surpassing consensus estimates but down from $0.99 per share in the year-ago quarter.

The company generated $144 million in revenues from products launched in 2022, primarily driven by lenalidomide, its myeloma treatment, its interchangeable insulin injectable Semglee, and its unbranded insulin pen in the United States. It is on track to achieve approximately $525 million in new product revenues in 2022, which is below expectations due to the timing of launches but with better-than-expected margins.

Viatris’ earnings are expected to contract by 4% in 2022, and the stock is down 17% over the past year. However, analysts, on average, expect Viatris to rise nearly 18% going forward, according to FactSet. The reason behind Wall Street’s optimism is changes to the company’s business plan that have already been set into motion.

The company is trimming its less-profitable operations, including its biosimilars, women’s health division, and over-the-counter drugs. In its place, it is adding an ophthalmology franchise through the $750 million acquisitions of Oyster Point Pharma and Famy Life Sciences. The deal is expected to close in the first quarter of 2023. Management expects the acquisition to generate at least $1 billion in sales by 2028.

The company has a relatively high debt-to-equity ratio of nearly two, but it has the right idea by trimming its less-profitable operations and paying down its debt. Management sees revenues expanding at a CAGR of 3% between 2024 and 2028 and EPS expanding at a CAGR of around 15% over the same period. VTRS hopes to use the expanding revenue to reward its investors through steady dividend growth. Its current yield is 4.4%, and its payout ratio is very safe at 20%. Though it’s a speculative recommendation based on the success of the company’s business transition, the rewards could be handsome.

Global healthcare leader Eli Lilly And Company (LLY) has been creating high-quality medicines for over a century. The drug firm focuses on endocrinology, oncology, neuroscience, and immunology. Essential products include Trulicity, Jardiance, Humalog, and Humulin for diabetes; Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.

The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of upcoming potential opportunities for investors to benefit from. In the first half of 2022, Lilly received word that the FDA was fast-tracking its investigation of tirzepatide, a drug designed to treat adults who are overweight with weight-related comorbidities such as diabetes. Eli Lilly expects its rolling application to be completed by April 2023.

JPMorgan analyst Chris Schott recently summed up his bullish outlook on LLY. The analyst believes that Eli Lilly remains the best-positioned growth story in his coverage and one of his top picks following the stock’s pullback over the past month. The analyst sees a “significant opportunity” for Tirzepadite in type 2 diabetes and obesity, which in his view, “warrants increased attention.” Schott currently gives the stock an Overweight rating and a $400 price target.

Lilly’s share price increased 40% in 2022 and seems likely to continue to gain steam into the new year. The stock sports a quarterly dividend of $1.13 per share or 1.24% annually. LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.

A strong pipeline and a stable dividend make Eli Lilly an attractive consideration. The pros on Wall Street also think so. Among 17 polled analysts, 14 say to Buy LLY, 2 call it a Hold, and only 1 rates the stock a Sell. A median 12-month price target of $400 represents a 10% increase from its current price.

Not every biotech stock is going to be a winner in 2023. COVID-19 vaccine winner Moderna (MRNA) is one name to avoid for now. If you had purchased MRNA shares before the pandemic in 2020, that investment would be worth around five times the initial purchase price today. The abundant cash flow generated from Moderna’s covid vaccine, Spikevax, helped finance share buybacks and grew its balance sheet in 2022. But with the worst of the pandemic in the rearview for most developed markets, sales have nowhere to go but lower.

Heading into 2023, Moderna is still relying on its covid vaccine to bring in the lion’s share of its income. This year the company is expected to bring in between $18 and $19 billion in advanced purchase agreements for Spikevax amid increasing competition. Meanwhile, its cancer vaccine studies are still mid-stage, so it’s too early to assume they will get the nod from the U.S. Food and Drug Administration. Assuming they succeed in late-stage trials and receive FDA approval, sales are unlikely to trend higher again for at least the next three years.

Generating its income from a single drug (Spikevax) is a risk no $70 billion company should take. With the worst of COVID-19 behind us, Moderna’s sales could plunge by 25% to 68% this year based on analyst expectations. The consensus of $8.74 billion represents a valuation of 9 times sales, which is quite pricey within the biotech space.

Three Wildly Undervalued Growth Stocks

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Editorial Staff

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March 29, 2023

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These stocks with enormous growth potential are too profoundly discounted to ignore.

The growth stock collapse of 2022 has shifted to a growth stock resurgence in 2023. Cathie Wood’s growth-centric ARK Innovation ETF (ARKK) sank nearly 70% last year. This year it’s up more than 20% and may just be the beginning amid a shifting economic backdrop.

The Federal Reserve has become increasingly dovish in 2023, downshifting all the way back to a 25-basis-point rate hike at its most recent meeting. Recent talk of a pause and potential rate cuts in the future has made way for investors with an appetite for growth stocks with high reward potential.

Even after a hot start to 2023, some growth stocks look way too cheap. We’ve got three recommendations of stocks with stellar growth potential presenting attractive risk-reward propositions at their current prices.

Meta Platforms Inc. (META)

One notable growth name that got hammered in 2022 is Meta Platforms Inc. The stock currently trades at less than 25x forward earnings. Still, with the most prominent family of apps and 4 billion users worldwide, META’s recovery this year has been swift. The ticker has stacked on 64% YTD.

Despite its recent rally, the social media leader’s stock is still down 46% from its high and looks cheaply valued for long-term investors. Meta trades at under 20 times the expected annual profit and four times expected sales. With a core business that has held up well against intense pressures, underappreciated potential for success in the metaverse and shares trading at multiples that leave room for big upside, Meta stock continues to look significantly undervalued.

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Lithium Americas Corp (LAC)

By 2029, electric vehicles could account for a third of the North American market and about 26% of vehicles produced worldwide, according to AutoForecast Solutions. Lithium Americas Corp is one company hoping to ride the wave of anticipated global EV demand. The company has full ownership of two development-stage mining operations in Argentina. One of which is approaching initial production, expected to come later this year.

The high-growth -potential small-cap has been gaining the attention of the pros on Wall Street. “We believe 2023 could be an eventful year as there could be a number of key announcements on growth projects and Argentina divesture, which could be catalysts for the share price,” explained HSBC analyst Santhosh Seshadri. To this end, Seshadri recently initiated coverage of LAC with a Buy rating, backed by a $36 price target.

Most analysts agree with Seshadri’s thesis. LAC claims a Strong Buy consensus rating, based on 13 Buys vs. 1 Hold and no Sell ratings. At $37, the average price target makes room for 12-month gains of 74%.

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AssetMark Financial Holdings (AMK)

Leading asset manager AssetMark Financial continues to grow as it looks to become a full-service wealth management platform. Its recent acquisition of Adhesion Wealth, which provides wealth management technology solutions to investment advisors and asset managers, will expand its offerings. The company has been growing rapidly and has forecast annual EPS growth of 32% during the next five years. It has also seen its valuation come down to a P/E of 22, which is an excellent value for this growth stock.

The stock is up 34% already this year. Even if the market does retreat, AssetMark still expects roughly 10% growth in assets on its platform in 2023 and 20% year-over-year revenue growth. And as we emerge from this volatile market toward the next bull market, the company, a leader in the market, should see continued growth since asset managers thrive in bull markets.

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Three Stocks to Avoid For Now

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Editorial Staff

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January 7, 2023

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Seeking out great stocks to buy is important, but many would say it’s even more essential to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. So, determining which stocks to trim or eliminate is essential for proper portfolio maintenance.

Even the best gardens need pruning, and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week.

With airline stocks currently trading at extremely low multiples, long-term-minded value seekers may be eyeing the group, wondering which ticker is the better buy. But some airlines are still drowning in debt from the pandemic. While several have had to cut routes and scale back on expansion plans as supply chain and labor constraints have delayed the production of new aircraft, airlines continue to struggle with labor shortages. The first name on our list of stocks to avoid is an air carrier that seems less equipped to handle what may be in the wings for the entire industry.

Jet Blue Airways (JBLU) has not had an easy year amid rising fuel costs, supply chain disruptions, and inflationary pressure. Recent losses have been compounded by Hurricane Nicole, a rare November storm that made landfall on the Atlantic Coast of Florida, causing closures and evacuations throughout the state and leaving a wake of destruction in its path. As a result, JetBlue was forced to cancel and suspend flights and issue travel waivers for destinations in the storm’s path. Nicole negatively affected operations for several airlines, but of those impacted, JetBlue seems to be struggling the most to bounce back.

With hurricane Nicole’s negative impact on operations, demand for the final month of the year has not been as strong as expected, according to the company’s management. As a result, the company revised its year-end and Q4 outlook. Management anticipates revenue per available seat mile for the fourth quarter of 2022 to be at the low end of its prior guided range of a 15-19% increase from the fourth quarter of 2019. JetBlue’s disappointing comments on air-travel demand resulted in the decline of shares of most airlines. The NYSE Airline index lost 5.77% over the past week, while JBLU sank nearly 8%.

With airline stocks currently trading at extremely low multiples, value seekers may be eyeing the group, wondering which ticker is the better buy. Some airlines will be more suited to withstand a slowing economy and possible recession, while JetBlue does not seem well-equipped for further negative impact. Anyone considering JBLU at less than 8 times earnings would do better to consider a more stable name.

While the future remains bright for renewable energy, not all solar stocks are a buy. Provider of solar engineering and construction services, iSun Inc. (ISUN), has seen operating losses skyrocket alongside revenue increases in recent years.

iSun reported third-quarter 2022 revenue of $19 million, representing a 185% increase over the same period in 2021. Alongside top-line growth over the past year, the company has reported $22 million in operating losses. Operating income in the third quarter was a loss of $4.9 million compared to a loss of $1.6 million over the same period in 2021. YTD’s operating income was a loss of $16.2 million compared to a loss of $7 million during the same period in 2021.

Given the company’s already high debt position after a series of acquisitions in 2021, the additional losses could force the company to raise equity in order to de-lever its balance sheet, which could mean further declines for iSun.

The small, unprofitable solar company’s stock is down 80% over the past 12 months, but it’s far from a bargain considering the risk factor.

There’s no question that electric vehicles are the future, but investors looking for bargains in the midst of the market meltdown would be wise to steer clear of third-party companies specializing in EV charging stations like Blink Charging (BLNK). It’s much too soon to predict winners in this cutthroat niche of the EV industry, mainly because it’s still unclear if third-party charging kiosks will ever be profitable.

Analysts don’t see Blink becoming profitable before 2026. By then, the company will likely be looking at a much different landscape – a lot can change in three years. From the current vantage point, the near future looks murky for the entire EV industry, considering the massive layoffs that have taken place this year amid supply chain pressure and production restrictions in China.

Blink Charging shares have fallen 76% since peaking in early 2021 and are 53% lower year-to-date, but the stock is still trading at 23 times revenues. For perspective, the price-to-sales ratio for the S&P 500 index as of December 1 was roughly 3. This was also way higher than what the ratio has been historically. The current consensus is to Hold Blink stock. We’ll stick to the sidelines on third-party EV charging companies until EV industry headwinds subside.

Three Stocks to Watch for the Week of March 13th

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Editorial Staff

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March 12, 2023

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Stocks pulled back sharply last week as renewed inflation concerns sparked worries of extended rate hikes, erasing nearly all of 2023’s market gains. Tough talk from Fed Chair Jerome Powell during his testimony before Congress on Tuesday suggested that the course of interest-rate hikes could steepen and last longer than expected if inflation remains high. The three major indexes all sustained steep weekly losses of around 4.5%, and the S&P 500 fell to its lowest level since early January.

Market participants will be focused on the latest inflation readings in the coming days, starting on Tuesday with the Consumer Price Index (CPI) report for February, followed by the Producer Price Index (PPI) reading on Wednesday. These reports will follow January data that showed prices for consumers and producers remained high, fueling concerns that there’s no immediate end in sight when it comes to interest-rate hikes.

On paper, this week’s first featured company should be reeling from the pressures impacting the consumer economy, but its brand remains as powerful as ever. The stock is a favorite among hedge funds, and it garners a Strong Buy rating from the Wall Street pros.

Apple (AAPL)

Apple’s greatest strengths center on its operational dominance. For instance, its three-year revenue growth rate stands at 20%, beating out 85.62% of its competitors. Its net margin pings at 24.56%, outpacing 95.52% of rivals. Currently, Wall Street analysts peg AAPL as a consensus Strong Buy. Further, their average price target stands at $173, implying over 16% upside potential.

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Matador resources (MTDR)

2022 was a huge year for energy stocks, but so far, in 2023, the sector’s performance has been underwhelming. However, several Wall Street pros say the bull market for energy stocks still has room to run.

Anyone seeking to beef up their energy position would do well to consider Matador resources. Matador shareholders can take confidence from the fact that EBIT margins are up from 36% to 60%, and revenue is growing. Earnings are expected to grow by 6.21% per year over the next ten years. MTDR is a good value with a PE ratio of 5.4 times compared to the US Oil and Gas industry average of 7 times.

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Archer-Daniels-Midland (ADM)

Despite the challenging conditions in the stock market last year, ADM stock has gained over 6.4%. Stronger-than-anticipated results from South America have helped it post robust top and bottom-line numbers in recent quarters. In its fourth quarter, sales and operating profits were up 13.6% and 18%, respectively. Surprisingly, ADM stock trades at 0.4 times forward sales estimates, roughly 62% lower than the consumer staples sector average.

ADM has a yield of 2.21% and boasts an A-graded dividend profile, demonstrating dividend growth for 50 consecutive years. Moreover, its forward dividend per share growth of 7.4% is more than 40% higher than the sector average.

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Three A.I. Stocks With Plenty of Room to Run

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Editorial Staff

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February 17, 2023

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Investors have been pouring into rapidly developing AI tech names over the past few months, and this is likely just the beginning. According to Grand View Research, the global artificial intelligence market reached a valuation of $136.55 billion in 2022. It’s projected that by 2030 the industry will command a revenue of nearly $1.9 trillion.

Anyone looking to profit from the paradigm shift may wonder which companies stand to gain the most as breakthrough advancements are made in the industry. Here we’ll look at three Buy rated standouts from the burgeoning AI group with average projected upsides of 40% or more.

CrowdStrike (CRWD)

With cyber threats materializing all the time, cybersecurity technology specialists, CrowdStrike (CRWD), is one of the most relevant AI stocks to buy. After losing nearly half of its value in 2022, CRWD is up 6% this year. Of 37 analysts offering a recommendation for the stock, 33 have an optimistic view, yielding a consensus Strong Buy assessment. In addition, their average price target stands at $162.59, implying an upside potential of over 40%. Therefore, CRWD is one of the top AI stocks to buy.

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Luminar (LAZR)

Luminar (LAZR) is at the forefront of lidar technology development with products that integrate sensors with AI, giving cars autonomous safety features to support a human driver. After losing more than 70% of its value in 2022, LAZR is up nearly 50% this year. The stock garners a solid Buy rating from the 12 analysts offering recommendations. An average price target of $12.50 represents a 76% upside from the current price.

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Brekshire Grey (BGRY)

Small-cap Brekshire Grey (BGRY) leans to the speculative side of the scale, but according to certain Wall Street pros, BGRY has the potential to reward investors with a more than 80% projected upside. The American tech company develops integrated artificial intelligence and robotic solutions for e-commerce, retail replenishment, and logistics and has been gaining investor attention. Share price is up a whopping 150% YTD and may have plenty of room to run if the 2 analysts offering recommendations are correct.

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Three Ways to Benefit From the Global Banking Nightmare

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Editorial Staff

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March 15, 2023

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The collapse of Signature Bank and Silicon Valley Bank sent shockwaves through the financial markets, but it may be fueling a rebound in some assets.

After panic ripped through markets last week, analysts are sounding the alarm on some tickers that have well overshot their downside. What’s more, some analysts have suggested that the added pressure on the financial sector could slow the pace of Fed rate hikes, which would likely help certain risk assets.

Whether you’re looking for a short-term win or to shore up your long-term returns ahead of more volatility, you’ll want to keep an eye on these assets in the coming days.

Bitcoin (BTC)

On Sunday evening, two days after Silicon Valley Bank’s collapse, the government announced that the bank’s depositors would get their money back, and it would provide an additional funding facility for distressed banks.

Bitcoin bulls have claimed the digital currency is a way for investors to shield themselves against government moves, such as quantitative easing and looser monetary policy, which they say erodes the value of fiat currency. Industry insiders say that the anticipation of a slower pace of interest rate hikes from the Federal Reserve is helping bitcoin. Proponents also point to bitcoin’s finite supply as a critical feature of it being a store of value.

“This past week’s events around the failure of SVB and other banks have also shone a spotlight on the power of decentralized currencies that people can fully custody and own,” said Vijay Ayyar, vice president of corporate development at crypto exchange Luno. “Decentralized finance is beginning to hit home in terms of a concept to many more people now.”

Bitcoin is up nearly 50% this year, beating major stock indexes and commodities.

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Charles Schwab Corp. Common Stock (SCHW)

Charles Schwab shares plunged 24% last week along with regional banks as traders worried they would have to sell their bond holdings early at significant losses to cover deposit withdrawals, like Silicon Valley Bank. However, Schwab CEO Walt Bettinger said in an interview with CNBC that Schwab is still experiencing “significant” asset inflows.

Earlier this week, Credit Suisse analyst Bill Katz upgraded the brokerage firm to outperform from neutral, saying it’s time for investors to “take advantage of the sharp share price decline.”

“We expect the net new asset (NNA) story to remain robust and capital ratios to quickly rebuild as we look into 2024-25, with the current value giving investors an opportunity to step into a high-quality, large-cap secular beneficiary,” Katz wrote.

The analyst’s $67.50 target price, down from $81.50 previously, means shares can rise another 14% from Wednesday’s closing price. The stock is down nearly 32% this year.

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Ark Innovation ETF (ARKK)

While most of Wall Street is in panic mode amidst the banking crisis, Cathie Wood’s flagship fund ARKK reeled in $397 million in new money on Tuesday, the most significant one-day inflow since April 2021, according to FactSet.

Investors are piling into the innovation fund under the belief that the current banking chaos may cause the Federal Reserve to pause its rate hike campaign, which would benefit growth stocks. “Once the Fed stops looking backwards at CPI inflation and starts addressing the deflationary banking crisis that a 19-fold increase in short rates and an inverted yield have caused, we would not be surprised to see a return to the Roaring Twenties,” Wood said in a tweet early Wednesday.

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Three Stocks to Avoid or Sell Next Week

By

Editorial Staff

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February 18, 2023

0

Seeking out great stocks to buy is important, but identifying quality investments is only half the battle. Many would say it’s even more essential for investors to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. So, figuring out which stocks to trim or get rid of is essential for proper portfolio maintenance.

Even the best gardens need pruning and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week.

Black Hills Corporation (BKH)

Natural gas producer Black Hills Corporation reset its growth outlook lower after reporting disappointing Q4 results, slashing its 2023 EPS view to $3.65-$3.85 from $4.00-$4.20. The revision was driven by a rapid shift in macroeconomic factors, including elevated natural gas price volatility and higher natural gas demand driven by winter storm Elliot in December 2022. With elevated natural gas price volatility, higher interest rates, and general inflationary pressures forecasted through 2024, Black Hills is only expected to grow earnings 2% in 2024 and 4% in 2025.

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Uber Technologies (UBER)

Uber shares surged higher immediately following its Feb. 8 earnings call. The ride-share giant reported strong numbers, and management provided an upbeat outlook for the current quarter. However, the stock has already given back some of those gains amid recession concerns. UBER’s current valuation may be overly optimistic about subsequent quarterly results. Another big run may not be in store for the ticker anytime soon.

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Opendoor Technologies (OPEN)

Opendoor Technologies (OPEN) aims to revolutionize the home-buying process with its automated solution for a smoother, quicker, and more convenient buying experience. Investors piled into OPEN during its market debut in 2020, However, OPEN stock has lost nearly 80% of its value over the past year, with expectations building that more pain could be on the horizon due to the widespread decline in the real estate market.
Redfin anticipates that there will be a 16% year over year decline in the number of existing home sales in 2023, making OPEN an ideal stock to sell.

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One Airline Stock to Consider and One to Stay Away From

By

Editorial Staff

-

December 22, 2022

0

Airline stocks are dirt cheap and worth considering ahead of an eventual recovery, but not all are well suited in the long run.

The airline industry has seen a remarkable recovery in 2022 thanks to increasing travel demand and consumers’ willingness to pay higher fares. Nevertheless, some airlines are still drowning in debt from the pandemic. At the same time, several have had to cut routes and scale back on expansion plans as supply chain and labor constraints have delayed the production of new aircraft, while airlines continue to struggle with labor shortages.

Airfare in the U.S. has eased from its peak earlier this year, but prices are still well above 2021 levels. According to data from the Bureau of Transportation Statistics, airfares were up 36% year-over-year in November. Rising inflation and higher interest rates could put a damper on demand in the short term, but many airlines are expected to return to profitability in 2023.

With airline stocks currently trading at very low multiples, many long-term-minded investors are eyeing the group, wondering which of these beaten-down tickers is the best value. Some airlines will be better equipped to withstand a slowing economy and possible recession, while others may struggle to keep up. Here we will examine two companies from the airline industry, one that seems prepared to build on recent success and one that could be left hanging by a thread in a weakening economy.

Delta Airlines (DAL), the second airline company to have joined the coveted S&P 500 Index, commands more than a 17% share of the domestic aviation market. As you would expect, most of the Atlanta, GA-based carrier’s revenues are realized from its airline segment. What might surprise you is that 10% of the $29.9-billion amount generated in 2021 came from the company’s refinery segment, which operates for the benefit of the airline division by providing it with jet fuel from its own production.

Fuel savings are crucial to a functioning aviation industry in this next chapter. From increasing costs to environmental impact, airlines have had plenty of reasons to save every bit of jet fuel they can. Delta recently revealed details of how its fleet renewal program has helped to save tens of millions of gallons of fuel.

Earlier this month, the airline heavyweight raised its Q4 and full-year 2022 guidance and forecast an upbeat 2023, driven by robust demand. The company now expects the fourth-quarter 2022 operating margin to be 11%. Management sees adjusted earnings per share in the $1.35-$1.40 range (the earlier outlook was in the range of $1-$1.25). For the full-year 2023, DAL expects 15-20% year-over-year revenue growth. Earnings per share and operating margin for 2023 are expected in the $5-$6 band and 10-12% range, respectively.

Delta has been more conservative than some competitors in bringing back capacity, but the carrier aims to have its network restored to 2019 levels next summer. In the meantime, several competitors have had to cut routes and scale back on expansion plans as supply chain and labor constraints have delayed the production of new aircraft, while airlines continue to struggle with labor shortages, but for Delta, bookings remain strong into early 2023.

Delta shares are currently very cheaply priced at less than eight times earnings. The stock garners an 85% Buy rating on Wall Street. A median consensus price target of $45 represents a 36% increase from the last price.

A less optimistic story from the airline industry is that of Jet Blue Airways (JBLU). Jet Blue has not had an easy year amid rising fuel costs, supply chain snags, and inflationary pressure. Recent losses have been compounded by Hurricane Nicole, a rare November storm that made landfall on the Atlantic Coast of Florida, causing closures and evacuations throughout the state and leaving a wake of destruction in its path. As a result, JetBlue was forced to cancel and suspend flights and issue travel waivers for destinations in the storm’s path. Nicole negatively affected operations for several airlines, but JetBlue seems to be struggling the most to bounce back.

With hurricane Nicole’s negative impact on operations, demand for the final month of the year has not been as strong as expected, according to the company’s management. Aside from the hurricane, this year’s holiday calendar timing has had a negative impact, with Christmas and New Year’s falling on weekends this December. As a result, the company revised its year-end and Q4 outlook. Management now anticipates revenue per available seat mile for the fourth quarter of 2022 to be at the low end of its prior guided range of a 15-19% increase from the fourth quarter of 2019.

With airline stocks currently trading at extremely low multiples, value seekers may be eyeing the group, wondering which ticker is the better buy. Some airlines will be more suited to withstand a slowing economy and possible recession, while JetBlue does not seem well-equipped for further negative impact. Anyone considering JBLU at less than eight times earnings would do better to consider a more stable name, like Delta.

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Airline stocks are dirt cheap and worth considering ahead of an eventual recovery, but not all are well suited in the long run.

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