Wall Street was flat last week. I thought my "three stocks to avoid" -- Tesla Motors, and Crown Castle, and MicroStrategy -- were going to lose to the market in the past week. They declined 11%, 13%, and 3%, respectively. The final result was an average slide of 9% for the week.
The S&P 500 inched 0.1% lower. I was correct. I have been right 51 of the past 79 weeks, or 65% of the time.
Let's turn our attention to the week ahead. I see Altria (MO 0.29%), and Intel (INTC 2.89%), and MicroStrategy (MSTR 8.36%) as stocks you might want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
1. Altria
Visit the landing page of Altria's website, and you'll be hit with Federal Court-mandated statements that all tobacco companies have to disclose on the risks of smoking. The very first thing you see when you hit its Investor Relations page is this unflattering case of self-flagellation.
We're guided by consumers and by the science that strongly supports the significant public health benefit of moving smokers toward a smoke-free future. Of course, the best choice for smokers is to quit.
It's hard to succeed when biting your lip is your marketing missive. To Altria's credit, it has moved beyond cigarettes over the years. Its empire went on to embrace wines, vaping, and cannabis, but at the end it's still at the mercy of vices with problematically addictive characteristics that can face regulatory crackdowns as it's experiencing now with its flagship product.
Image source: Getty Images.
Altria will discuss its first-quarter results on Thursday morning. Analysts see low single-digit growth on both ends of the income statement, but this is a former blue chip that has proven mortal lately. Altria used to routinely "smoke" Wall Street profit targets, but it has failed to beat earnings forecasts by more than 1% for three consecutive quarters. Analysts see revenue growing by less than 2% this year and again in 2024, failing to keep up with inflation.
Income investors will gravitate to Altria's addictive 8.1% yield, but the path to sustainability -- and much less growth -- isn't clear. With its debt-heavy balance sheet in a climate of rising borrowing costs and a dicey outlook for most of its businesses the near-term prospects aren't promising. It's hard to get excited about this week's financial update.
2. Intel
Another titan that could be serving up unsatisfactory quarterly results this week is Intel. The chipmaker has evolved beyond its PC roots, but even its data-centric solutions are struggling to show signs of life.
Analysts see a quarterly deficit when Intel reports fresh financials after the market close on Thursday, reversing a prior profit. Revenue is expected to fall sharply. It's not a fluke, as Wall Street's bracing for a 20% decline on the top line this year. The market isn't necessarily being conservative here. Intel has missed analyst earnings estimates in two of the last three reports.
Unlike Altria, Intel's 1.6% dividend yield isn't going to be a dinner bell when income investors can safely earn three times as much in a top money market fund. Analyst earnings estimates for this year and 2024 have fallen precipitously over the last few months. The old "Intel Inside" marketing campaign rings hollow when Intel has been out to the doghouse.
3. MicroStrategy
MicroStrategy was the best performer of the three stocks I figured would lose to the market last week, shedding 3% of its value against double-digit percentage losses with the other two entires. Let's keep it on this list. The stock has still more than doubled this year -- entirely on the rebound in Bitcoin (BTC 0.00%) -- making it vulnerable unless cryptocurrency prices keeps climbing higher.
Its claim to fame is that MicroStrategy is the largest corporate holder of Bitcoin, shelling out $4.2 billion over the years for 140,000 Bitcoin. The stake is currently worth $3.9 billion, accounting for the majority of its $6.2 billion in enterprise value.
There isn't a lot to like about MicroStrategy, unless you see the point of buying a company that has 63% of its enterprise value backed by the current price of Bitcoin. Its core business intelligence software platform is woefully uninspiring. Revenue has declined in seven of the past eight years. Michael Saylor is the name everyone knows when it comes to MicroStrategy, but he stepped down as CEO last year after his 33-year tenure. He remains as the enterprise software specialist's executive chairman, but until the business itself shows signs of life this is basically a way to overpay for Bitcoin itself.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in Altria, Intel, and MicroStrategy this week.
Rick Munarriz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Crown Castle, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.
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April 24, 2023 at 06:30PM
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3 Stocks to Avoid This Week - The Motley Fool
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