I ended 2021 on a hot streak with my weekly column where I distinguish the actions to avoid in the coming week. The new year promises to be a little more difficult. My three actions to avoid last week were in motion – like Constellation brands (NYSE: STZ), GameStop (NYSE: GME), and SeaWorld Entertainment (NYSE: MER) fell by 2%, 5% and 5%, respectively, with an average decline of 0.7%.
the S&P 500 fell 1.9% for the week. The stocks I picked fell – on average – but after 11 weeks of my bearish calls beating the market, I fell short last week. This week i see Delta Airlines (NYSE: DAL), Lucid engines (NASDAQ: LCID), and SeaWorld Entertainment (NYSE: MER) like actions that you might want to consider stepping away from. Let’s review my reasons for short-term pessimism.
There aren’t many companies releasing new financial data this week. Profits season kicks off later this month, and one company to watch will be Delta. The historic air carrier publishes its quarterly results Thursday morning.
Year-to-year comparisons will impress. Wall Street pros see Delta making a small profit, with earnings more than doubled from depressed results a year earlier. The problem is, the recent surge in COVID-19 cases must weigh on future bookings. We’ve seen the industry cancel flights before simply because airlines can’t muster enough healthy hires to keep their routes running.
Add in fragile passengers – and the potential for vaccination requirements if the number of cases continues to break previous records – and the near-term outlook is uncertain enough that you probably want you to return to your seat to buckle up. Figures for the quarter itself could be good on Thursday, but the outlook could be problematic.
One of the biggest winners last week was Lucid Motors, advancing 10% as the general market moved down. There is a lot of buzz for Lucid’s luxury electric vehicles. Its flagship product Lucid Air has been operated as MotorTrend‘s Car of the Year two months ago, a great honor for a car that has just arrived on the market.
Lucid is exciting and pushes the world to grow quickly. The blow to Lucid is that he now has a market cap of $ 69 billion. Lucid Air is a nice car with rave initial reviews, but it’s a niche product with a starting price of $ 77,400. Analysts don’t see profitability for at least three years, and other companies with much more experience in manufacturing and selling automobiles are entering the electric car market.
This theme park operator cut my winning streak short after 11 weeks. In the past seven weeks, it’s also the only title among 21 caps that has increased for the week. So it would make sense for SeaWorld Entertainment to return to this list again. The action more than doubled last year and it was one of the few consumer actions to kick off 2022 on a positive note.
As I mentioned last time, I think SeaWorld will have a good quarter to report when it moves to its next financial update in a few weeks. The biggest concern right now is that COVID-19 cases are reducing crowds at theme parks. Unlike regional operators which are largely closed this time of year, most of SeaWorld’s fleets operate year round in Florida, California, and Texas. These three states are experiencing a significant increase in the number of cases and hospitalizations. They might not necessarily close, but declining attendance and thinning staff could be a problem.
If you’re looking for safe stocks, you probably won’t find them at Lucid Motors, Delta Airlines, and SeaWorld Entertainment this week.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.