I took a look at three stocks to avoid last week, predicting that GameStop (NYSE:GME), Intuitive Surgical (NASDAQ:ISRG), and GoPro (NASDAQ:GPRO) were in for a rough few days. I was wrong on all three fronts…
- GameStop shot 11% higher. A hedge fund took a sizable stake in the struggling video game retailer, and it was confirmed that the deal signed earlier this month with Microsoft (NASDAQ:MSFT) includes royalties from digital Xbox downloads. There was an analyst downgrade following the surge, but it wasn’t enough. I got this one wrong.
- Intuitive Surgical rose 2%. The company behind the da Vinci surgical robotics arm initially moved lower after posting mixed quarterly results, but the shares eventually ticked higher. Revenue declined on a 29% slide in surgical system shipments, but results still topped expectations. I also got this wrong.
- GoPro was the third pick I panned last week. It was also the third stock I got wrong. All of the stock’s 10% rise happened on Monday, as momentum continued after announcing earlier this month that its premium subscriber base had topped 500,000 members.
The three stocks averaged a nearly 8% climb, well ahead of the S&P’s meager 0.2% rise for the week. I failed, and failed badly. Let’s see if I can get back on track with my bear-tracking skills.
I’m putting another token into this game. If I thought that the leading small-box retailer of video games hadn’t earned its 52-week highs a week ago, I’m even more adamant now, with the shares trading even higher.
A hedge fund taking a 5.5% stake last week doesn’t mean that it will chase the other 94.5% shares higher. The partnership with Microsoft is intriguing, but revenue will keep heading lower the way it has every year since 2018. The revenue-sharing arrangement with Microsoft in exchange for having GameStop buy a ton of its Surface tablets and subscribe to the software giant’s analytical and productivity tools isn’t as great as the market thinks. I even covered for this contingency in last week’s diss.
“Even if GameStop gets a piece of the action, this is all about weaning folks off discs and cartridges, highly problematic since GameStop’s chunkiest margins lie in physical software and the resale of physical software,” I wrote last week. I stand by that even more now.
One of the more interesting companies reporting earnings this week is AT&T. Telcos in general are struggling these days, and AT&T finds itself so out of favor that it’s trading near its 52-week low and with its yield ballooning up to 7.6%.
AT&T has two ways to impress the market this week. CEO John Stankey will make a presentation at a tech conference on Monday. We then have AT&T’s third-quarter earnings report after…
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