The stock market is a fascinating and complex beast. The market has been choppy for the last couple of weeks. If you haven’t been keeping up on your news, you might be wondering why.
With government policy uncertain and the global economy in flux, it’s more important than ever to have a diversified portfolio and choose your stocks wisely. Here are some stocks I recommend avoiding this week:
Penn National ($Penn)
Penn National Gaming owns and operates 44 casinos in the US and Canada, including the Tropicana Las Vegas, Hollywood Casinos, and Retama Park. In addition to its casino operations, Penn National runs several online sportsbooks. It also has a 36% stake in Barstool Sports (shared with The Chernin Group).
In the past week, there have been several price target changes for Penn National Gaming, Inc. (NASDAQ:PENN). On April 13th, Wells Fargo & Company lowered their price target from $52.00 to $50.00. This was followed by Morgan Stanley reducing its target from $55.00 to $51.00 on May 18th. JMP Securities recently upgraded its target to $52, with a Market Outperform rating.
Regardless of the rating, Penn stock closed at $32.67 on Tuesday, down 2.6% from the previous trading session. It further shed 2.31% on Thursday. However, it’s worth noting that most of its competitors have also been in the red. CZR stock is down by 53%, MGM stock by 33%, and PDYPY stock by 35%. But the P/E ratio sets each apart.
Penn stock has been hit hard by the recessionary environment. The company’s earnings have been adversely affected by low visitation to casinos and high gas prices. In addition, the company is facing stiff competition from other casino operators such as MGM Resorts International (NYSE: MGM) and Caesars Entertainment Corporation (NASDAQ: CZR).
My verdict: $Penn doesn’t exactly look like it will cut it in the next few weeks. Currently, the global economy is recessionary, diverting the attention of consumers away from fun and pleasure. Unless there are significant changes in economic situations, I recommend avoiding the stock for now.
Micron Technology ($MU)
Micron Technology has had a good run, but that’s to be in doubt. The company, which makes microscopic semiconductors for use in electronics and tech products, saw its stock rising seven times and falling six over 13 quarters. It’s been relatively unpredictable.
Shares have fallen 37% in the past five trading sessions, a decline triggered by concerns about slowing demand for DRAM memory chips. The company’s shares are currently down over 25% from the May high.
Micron Technology Inc (NASDAQ:MU) ended the week with its fiscal 2022 third-quarter earnings on June 30. Its dim outlook suggested a decline in tech spending. The largest US chip maker warned that sales would drop in its fourth quarter by $1.94 billion below analysts’ $9.14 billion estimates. Shortly after the announcement, shares fell more than 8%.
The main reason for the weakness in Micron’s stock is weak memory pricing. As we have seen repeatedly, when prices fall, so do profits. Pricing pressure from China and the Ukraine-Russia war has been weighing on Micron’s earnings and hit them particularly hard.
The increase in DRAM price declines was tremendous as they did not factor in a significant cut during their Q3 earnings call. There could be more pain ahead since the industry appears to be at an inflexion point where chip suppliers face stiff policies and slowing demand growth.
My verdict: $MU has been battered this year due to falling DRAM prices. It is priced low relative to the NTM outlook for DRAM sales. Its estimated annual prices are also above 10%, making it ideal for holding. However, I won’t recommend buying it. The massive drawdown is too crucial an investment decision to disregard.
Signify Health Inc. ($SGFY)
The rapidly ageing population and the need for quality medical care facilities reinforce the significance of Signify Health. As a healthcare technology company, it provides solutions for ambulatory care, enabling health systems to manage their facilities effectively and efficiently.
However, beyond its essential services, SGFY has been facing significant operational deficiencies. The stock slumped in the past few months, prompting weak POWR ratings.
Over the past year, the stock has declined by 53.3% and 37.8% over the past three months. The stock is estimated to decline 25% next quarter, based on various factors, including volatility, investor sentiment, and more.
In the most recent quarter, SGFY’s revenue increased 20.3% year-over-year to $216.5 million. That said, the company reported a net loss of $10.9 million for the same period. It also has a 33.5% year-over-year decline.
The reasons for the decline are not far-fetched. The company has been facing stiff competition from its peers. Lack of workforce is another candidate reason behind its decreasing performance lately. There are likewise the consequences of the pandemic, which are still eating up some healthcare sectors.
My verdict: It seems you should stay away from $SGFY unless you are looking for a shorting opportunity. Even though its debt load has decreased, it’s still higher than average compared with other healthcare companies.
