Wall Street had a mild bounce last week after a flat start to the second quarter the week before. I thought my “three stocks to avoid” — CarMax, WD-40, and Tesla Motors — were going to lose to the market in the past week. They rose 8%, climbed 1%, and finished unchanged, respectively. The final result was an average ascent of 3% for the week.
The S&P 500 moved 1.2% higher. I was wrong, but I have still been right 50 of the past 78 weeks, or 64% of the time.
Let’s turn our attention to the week ahead. I see Tesla Motors (TSLA 1.10%), and Crown Castle (CCI 2.25%), and MicroStrategy (MSTR -6.21%) 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. Tesla Motors
I mentioned last week that Tesla was likely booking a two-week stay on this list, and here we go into the back nine. Tesla was my lone pick to lose to the market last week — marching in place as stocks inched higher — but this is the week when things get real. The most valuable automaker by market cap will pop open the frunk to present its first-quarter results on Wednesday. It could be problematic.
Tesla has been cutting prices on its cars in 2023. We’ll find out this week what the lower price tags mean to margins for the leading maker of electric vehicles. Analysts see revenue growing 24% for the period, its weakest year-over-year gain in nearly three years. The bottom line will likely be even worse.
We already know that Tesla delivered 422,875 vehicles during the first three months of the year. This is a weaker than expected 36% increase, and revenue should be lower than that since the prices car buyers are paying are lower now than they were a year ago. The problem with lowering prices to have demand increase alongside the ramped-up supply is that costs aren’t heading lower. Analysts see Tesla clocking in with a profit of $0.86 a share, less then both the $1.07 a share it posted a year earlier and the $1.11 a share that the Wall Street pros were targeting for the quarter at the start of 2023.
The market has been paring back top- and bottom-line forecasts for Tesla in 2023, but the stock hasn’t shifted into reverse. The shares have soared 50% year-to-date. Bulls will argue that expectations are already low, and there’s always the chance that Elon Musk has some juicy news to give long-term investors hope. It’s still a potentially thorny financial update.
2. Crown Castle
There’s a missed connection between investors and Crown Castle these days. Crown Castle is the nation’s largest provider of shared communications infrastructure. Its portfolio consists of more than 40,000 cell towers, leasing space on the structures to wireless carriers and other companies looking to amplify their hyperlocal presence. Crown Castle’s empire also watches over roughly 120,000 on-air or under-contract small cell nodes as well as 85,000 route miles of fiber.
This was pitched as a great way to play the 5G revolution, but the bullish case has come under fire. Sector consolidation and recession-fearing consumers hesitant to invest in new smartphones have slowed growth for cell tower operators. When Crown Castle reports on Wednesday afternoon the numbers aren’t likely to impress. Analysts see a mere 1% increase on the top line and a 7% decline in earnings per share. Crown Castle fell short on the bottom line last time out. It could be a repeat performance, especially with Wall Street lowering its targets in recent months.
3. MicroStrategy
The third stock on this week’s list happens to be the third most valuable stock — by market cap — to more than double this year. MicroStrategy shares are up 136% so far in 2023.
Its core business intelligence software platform isn’t necessarily gaining traction. MicroStategy revenue has declined in seven of the eight previous years. The enterprise software specialist has also fallen short of analyst profit estimates every time over the past year. The surge in MicroStrategy stock is result of CEO Michael Saylor having spent the last few years buying Bitcoin (BTC -3.21%) with the company’s resources. With the leading cryptocurrency denomination almost doubling itself this year, MicroStrategy has become more a sympathy play for Bitcoin and less a verdict on its fundamentals. It’s not a sustainable move here.
The stock market is always on the move. If you’re looking for safe stocks, you aren’t likely to find them in Tesla Motors, Crown Castle, and MicroStrategy this week.