Three Stocks to Avoid for the Week of March 12th

Seeking out great stocks to buy is essential, but many would say it’s even more important 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.  

BBBY stock was especially volatile early in the week, nearly doubling on Monday’s open in response to the news of an activist stake from RC Ventures before paring much of that gain. RC Ventures, the investment company of Chewy co-founder and GameStop chairman Ryan Cohen, confirmed it holds a 9.8% stake in Bed Bath & Beyond.  BBBY finished the week 24% higher.  Considering the persisting headwinds, we’re staying away as its Q4 earnings call approaches.

Global supply constraints continue to drag Bed Bath & Beyond sales lower, while inventory replenishment delays are expected to continue well into 2022.  BBBY was unable to meet demand in Q3, leading to misses on the top and bottom line.  Management estimates missing out on $100M of sales for the quarter and admits that the company’s turnaround is taking longer than anticipated.     

As a reflection of the continued impact of anticipated global supply chain challenges, the company lowered its Q4 guidance.  BBBY now expects EPS of $0 -$0.15 and Q4 revenue of $2.1B.  The revelation sent waves through the analyst community, where revenue of $2.27B and 72c EPS is expected for the fourth quarter. 

We’ll find out how the actual numbers stack up on April 12th when the company reports Q4 and full-year earnings.   

New York-based LivePerson, Inc. (LPSN) is best known as the developer of the Conversational Cloud, a software platform that allows consumers to message with brands.  The company tops our list this week after Q4 financial results that point to a substantial slowdown in organic revenue growth that is unlikely to meaningfully improve until fiscal 2023.

Management signaled a shift in the growth strategy to focus more on generating earnings in 2022 rather than gaining enterprise customers.  The slower growth profile, powered by a steady return toward more normal in-person working trends, could translate into weaker earnings than Wall Street is hoping for.

To that end, the company predicted sales in the first quarter of about $125 million, translating into a 16% boost.  Revenue for the full year will climb by less than 20% to about $560 million, where most Wall Street pros were looking for that 2022 sales figure to be closer to $600 million.  

No less than nine firms downgraded LivePerson after the disappointing call.  Among the analysts to revise their ratings was Evercore ISI analyst Peter Levine who downgraded LPSN to In-Line from Outperform and slashed the price target to $20, down from $75 following the company’s “sub-par results and a weak outlook.”

Things have gone from bad to worse for American Airlines (AAL) over the past few weeks as chaos in the energy market has escalated.  Rocketing fuel prices threaten to take the wind out of American’s sails before it’s had a chance to recover from omicron and Boeing’s February misstep.   

As air travel struggled to recover from the omicron variant, AAL took a huge hit last month after Boeing delays forced suspension of routes, including those between Seattle and London, Los Angeles and Sydney, and Dallas and Santiago, Chile.  Persisting snags in the delivery of Boeing’s new 787 Dreamliners are also expected to delay the launch of service between Dallas and Tel Aviv and reduce frequencies between Miami and Sao Paulo, Brazil. 

Considering AAL’s already sensitive financial position, higher costs and lower capacity threaten to further deflate the stock as international and business travel stagnates amid geopolitical tensions.  Redburn analyst James Goodall now expects all the network airlines will see negative free cash flow and rising net debt this year.  If there is a bright spot in the airlines right now, American is not it.   



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