I took a look at three stocks to avoid last week, predicting that Coinbase Global (COIN -3.17%), Six Flags Entertainment (SIX), and MicroStrategy (MSTR -3.24%) would have a bad week.
- Coinbase rebounded after tumbling 15% a week earlier. The leading crypto marketplace rose 2% last week.
- Six Flags Entertainment took a roller coaster-sized 3.5% dip on the week after posting financial results. Attendance revenue declined 38% and 36%, respectively, in the first quarter, but that was actually a lot better than expected. Several analysts jacked up their price targets on the stock following the quarterly update, but the stock had already discounted a recovery.
- Finally we have MicroStrategy as the big winner of the three stocks, rising 7% for the week. MicroStrategy's become a popular coattail play for Bitcoin (BTC 0.91%). It has invested $2.226 billion to acquire 91,579 Bitcoin tokens. A position that has catapulted to nearly $5.3 billion in value. Bitcoin moved higher on the week, but MicroStrategy also had a blowout quarter with its actual enterprise analytics business. It came through with its strongest top-line growth in nine years.
The three stocks averaged a 2.8% gain for the week. The S&P 500 was flat, rising a mere 0.02% for the week. I was wrong. Let's see if I can get back on track. This week, I see Alteryx (AYX), Cedar Fair (FUN), and Grayscale Digital Large Cap Fund (GDLC 0.11%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Image source: Getty Images.
1. Alteryx
I'm not a fan of kicking a company when it's down, and Alteryx is trading near a two-year low right now. The provider of cloud-based analytics reports quarterly results on Tuesday. A whiff of good news can naturally send the depressed shares higher, and a quick look at recent results shows that Alteryx has earned at least twice as much as what analysts were expecting in each of the last three quarters.
The problem -- and stay with me here -- is that guidance has been horrendous. Alteryx is ultimately conservative in its grim outlooks, explaining why it's able to impress on that end. The problem is that investors know how that particular game is played. If you take a four steps back and take two steps forward you're still losing ground. Revenue growth has been decelerating sharply. Its dollar-based net expansion rate is contracting.
If Alteryx slips after another beat this week look beyond the rearview mirror. Last time out it did beat expectations, but who is going to get excited about a growth stock posting year-over-year growth of 3%? How do you warm up to a company that was expected to earn $0.73 a share for all of this year three months ago, only to warn that it will roughly break even? A beat isn't enough for Alteryx. It needs a crystal ball that doesn't get messier with every quarterly shake.
2. Cedar Fair
A week after Six Flags disappointed investors Cedar Fair steps up with its quarterly results. Cedar Fair is a great regional amusement park operator. Just ask any coaster enthusiast what they think about Cedar Point in Ohio. However, Cedar Fair hasn't been as aggressive as Six Flags and others in reopening its gated attractions, and that's going to be a cash-flow concern heading into this summer's peak period after extending last year's annual pass holders through the end of this year at no additional cost.
Cedar Fair's year-over-year comparison won't mean much. This is a seasonally sleepy period for the industry. However, if it didn't woo the market last week when Six Flags painted a rosy picture of loyal pass holders hungry to return to white-knuckled thrills, will Cedar Fair fare any better? It also doesn't help that Cedar Fair's bottom-line results have fallen short of expectations in three of the past four quarters.
3. Grayscale Large Cap Digital Fund
Grayscale runs some pretty interesting cryptocurrency trusts, giving investors a way to play the booming industry through exchange-traded investments available for all brokerage accounts. Grayscale Large Cap Digital Fund is its push into a diversified investing vehicle that owns five different digital currencies. The problem here is that it begins this week trading at a 12% premium to its net assets.
Grayscale's two largest trusts also once traded at big mark-ups to the cold-stored crypto they were holding, but now they trade at 10% and 1% discounts to net asset value. The two currencies make up more than 95% of Grayscale Large Cap Digital Fund. It makes a lot more sense to just buy the two discounted trusts and leave this Grayscale fund alone until it goes for less than the sum of its parts.
If you're looking for safe stocks, you aren't likely to find them in Alteryx, Cedar Fair, and Grayscale Large Cap Digital Fund this week.
