I observed three actions to avoid last week, and all three investments turned out to be even more volatile than I expected. The world’s largest cruise line moved 2% more during the week, matching positive market performance. The other two stocks decreased 5% and 34%, bringing the average return on the three investments to negative-12%. Let’s take a look at three actions that seem vulnerable this time.
I see Tesla Motors (NASDAQ: TSLA), Charles Schwab (NYSE: SCHW)and XpresSpa (NASDAQ: XSPA) as vulnerable investments in the short term. Let’s see why I think these three actions should be avoided this week.
Image source: Getty Images.
Tesla Motors
This won’t be the first time someone has argued that Tesla Motors’ shares are overvalued, only for the bulls to likely burn them. I realize Tesla Motors has momentum on its side, and it has never been cheap by any valuation measure. However, it was sobering to see the stock hit a record high shortly before Friday’s close.
Tesla Motors shares soared 28% last week alone. It has more than tripled in 2020. With the fast-growing electric vehicle maker reporting gains this week, is the market discounting an explosive report? Stock is not cheap. Tesla is trading at a business value 11.3 times its final earnings. You may meet market favorites that trade at higher multiples, but are not working hard in the low-margin auto industry. Gas is cheap these days. The recession is going to eat into major purchases. Tesla Motors deserves accessories for everything it has done to make green vehicles in vogue, but this doesn’t seem like a company worth its $ 286 billion market cap.
You don’t have to believe my word. Elon Musk felt the same way two months ago.
Tesla’s share price is too high
– Elon Musk (@elonmusk) May 1, 2020
Tesla’s shares have nearly doubled since Musk’s tweet. The long-term prospects for Tesla are fabulous. The short-term prospects for your inflated stock are problematic.
Charles Schwab
The earnings season is well underway, and a name to see is Charles Schwab. The leading discount broker with more than $ 4 trillion in customer assets reports quarterly results on Thursday. Schwab does a good job of presenting weekly business trends and monthly customer activity, so we have a good idea of how your business is maintained. The problem is that between its shopping spree, the industry’s shift to commission-free stock trading, low interest rates, and a race to the bottom in spending rates for investment products, there are many ways for the leader become in balance.
Schwab hasn’t hit Wall Street’s profit targets in consecutive quarters, and analysts see a drop in earnings for the current quarter and for all of 2020. With as much as it can go wrong, it’s probably a good idea to stick around. on the sidelines to see how new finances develop.
XpresSpa
I am not in the habit of repeating actions on this column in consecutive weeks, but I will make an exception for XpresSpa. The provider of spa services and wellness-related retail products at 50 locations at 25 airports was down 5% last week, losing to a 2% market advance.
XpresSpa released an apparently positive financial update last week, but it wasn’t enough to get the stock out of last week’s hole. Its airport-focused spas are difficult to sell in this climate, and the company is trying to shift gears by turning some of its storefronts into XpresCheck outlets. The first XpresCheck opened at the JFK in New York last month to evaluate airport employees, and XpresSpa is in active negotiations with airports for future locations.
Despite raising roughly $ 48 million this year in a move to boost its liquidity, we have seen its share count explode in 2020, even with a reverse 1-by-3 stock split last month. Your market capitalization has broken above $ 200 million, but is it guaranteed? The old model didn’t work even before COVID-19 hit. Revenue fell in 2019, and XpresCheck is either a temporary fix or a symptom of a long-term drag on airport traffic. It is a lose-lose scenario.
If you are looking for safe stocks, you are not likely to find them at Tesla Motors, Charles Schwab and XpresSpa this week.
