Last week was rough for the stock market, and that typically plays out well for my feature where I single out three stocks that I think will lose to the market in the week ahead. My three stocks to avoid last week were on the move…
down 13%, down 10%, and down 10% — averaging out to an 11% decline.
The S&P 500 slipped 2.2% for the week, so I was the relative winner with my bearish calls for the sixth week in a row. This week I see AMC Entertainment (NYSE:AMC), American Airlines Group (NASDAQ:AAL), and Splunk (NASDAQ:SPLK) as stocks that you may want to consider steering clear from this week. Let’s go over my reasons for the near-term pessimism.
I have a soft spot for AMC and all that CEO Adam Aron has done to set his chain apart from its multiplex rivals. The stock’s valuation is out of whack within the industry if we look ahead to next year, but betting against AMC has often proved painful in 2021.
This may be one of the justifiable pockets of pessimism. AMC shares surprisingly slipped just 3% on Friday as news of a fresh COVID-19 variant rattled the overall market. Box office returns over the holiday weekend were disappointing, and it’s easy to see folks scaling back on screenings in the near term if the new omicron variant proves disruptive.
We’re not at the same point where we were a year ago. Movie studios aren’t delaying releases. Streaming services are giving theatrical release exclusivity windows a shot. However, all of this changes if folks stop going to the movies. AMC should continue to gain market share even through a downturn, but the shares may not have priced in the full potential impact of a surge in cases if omicron isn’t kept in check.
American Airlines Group
Airlines didn’t have it as bad as cruise line operators did when the pandemic hit last year. Countries were quick to get folks flying again despite the obvious risks of spreading the COVID-19 virus inside an enclosed airplane for hours of cramped air travel. Will the new and problematic omicron variant change that approach?
Dutch authorities are looking into a pair of inbound flights from South Africa after 61 passengers tested positive for the COVID-19 virus.
Airlines got a pass because air travel generates tourism and establishes a sense of normality. It wasn’t the cruise line industry that operates offshore with tax-advantaged operating structures and generates little revenue at the local level. We can’t yet suggest that the omicron variant will change the pro-airline mindset, but we’re already seeing international travel restrictions start to happen. A return to profitability next summer for American Airlines doesn’t seem to be on the flight plan anymore, and jet fuel prices setting carriers back a lot more than during the last slowdown. The stock took a…
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