Stocks have had a dismal 2022 overall, but the market showed some signs of life in July, posting the best returns of any month since November 2021. But even if the stocks are on their way out of a bear market, a rising tide doesn’t necessarily lift all boats.
Some stocks that have had a rough time are still not ready to bounce, while others that have had negative recent news may have further yet to fall.
Here’s a list of seven of the most concerning stocks to watch in August, along with an explanation as to why investing in them may not be best for your money right now.
Teladoc Health (TDOC)
- Stock price as of Aug. 4, 2022: $37.46
Teladoc Health has taken an absolute beating in 2022, down about 58% year-to-date as of Aug. 4. At recent prices, the former darling of the pandemic has plummeted a whopping 87% from its 2021 all-time high of $294.54.
At these levels, the stock has perhaps unsurprisingly generated some interest among bargain hunters, who feel that any stock down that much is a “value.” While that may indeed be the case over the long run, the short-term outlook for the stock is decidedly negative.
In April, the stock reported a huge loss and cut its full-year outlook, and shares tanked nearly 50% in response. Things weren’t much better in July, when the company reported yet another outsized loss, slashed forward estimates and endured a 20% stock drop.
On Aug. 2, two Wall Street analysts cut their ratings on the stock, voicing concerns about the company’s near-term performance. Although the stock may still have long-term legs, shares should likely be avoided in August.
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Mercury General Corporation (MCY)
- Stock price as of Aug. 4, 2022: $32.42
Underfollowed stocks like Mercury General are often high-risk, high-reward plays. If things go well, analysts and investors may flock to the stock, sending prices rapidly higher. But if the company is underperforming and remains under the radar, there’s no buying pressure to lift the stock.
Mercury General is followed by a single Wall Street analyst, who carries a rating of “sell” on the shares. As Wall Street by nature is bullish and reluctant to rate a stock anything below “neutral” or “market perform,” having its only analyst proclaim that investors should sell shares is a bold statement.
On Aug. 2, Mercury General cut its dividend by 50%, citing “challenging business conditions” and “extraordinarily high inflation rates.” For the time being, it seems like it’s a good bet to steer clear of the insurer’s shares.
- Stock price as of Aug. 4, 2022: $38.36
GameStop was the very definition of a “meme stock” back before anyone knew what that meant. The company’s shares soared to glorious highs in 2021 as investors piled into shares based on stock message board recommendations. Between herd buying and a massive short squeeze, shares jumped 400% in a single week alone at the end of January 2021.
While there are still rabid believers out there, the meme stock phenomenon has essentially died out in mid-2022. After the frenzy of early 2021, shares have essentially treaded water over the past year, although to their credit they have sidestepped most of the carnage the overall market has endured in 2022. The stock seems to be waiting for its next event-driven rally, but that makes shares in GameStop a speculation, not an investment.
AMC Entertainment (AMC)
- Stock price as of Aug. 4, 2022: $18.66
AMC Entertainment was another stock that benefited mightily from the meme stock trend of 2021, but it seems as if the company’s forward outlook is finally resonating with investors. Shares of the theater chain company are down about 33% year-to-date, and analysts think they have further to fall.
The six analysts covering the stock have a consensus “underperform” on the shares and a 12-month price target of $5.67, or nearly 70% below current levels. The negative forward outlook and the volatility of the shares make the company a potential powder keg for investors.
- Stock price as of Aug. 4, 2022: $35.66
In most market environments, Intel is a great investment. However, the company is struggling mightily in 2022. On July 28, the company posted its largest top-line miss since 1999, with revenue falling 22%, missing consensus estimates by 14%.
Additionally, the company trimmed forward earnings estimates, citing delayed PC refresh cycles. Analysts at Baird downgraded the company, citing additional issues with the supply chain and shifting consumer patterns. Overall, it seems as if Intel has some significant near-term issues to overcome before resuming its growth trends, making the shares easy to avoid for now.
- Stock price as of Aug. 4, 2022: $10.25
Snap shares are down an incredible 78% year-to-date and closer to 86% over the past year. Just as with Teladoc Health, these types of declines will no doubt generate buyer support from investors looking for a “value,” but those seeking short-term results may want to look elsewhere.
On July 21, the company reported its weakest sales growth ever, in addition to slowing its hiring and refusing to offer forward guidance. Snap reported that rising inflation and the potential for an economic recession had caused its customers to reduce their advertising spend, which hurt the company’s top line.
The company’s shares may ultimately bottom out, but when and where is just a speculation at this stage.
- Stock price as of Aug. 4, 2022: $41.06
Twitter is another stock that may well be a long-term winner, but in its current situation, it’s best avoided by most investors.
In May, controversial Tesla CEO Elon Musk announced he would buy Twitter for $54.20 per share, which at the time was a 38% premium over the current stock price. In July, however, Musk said he would back out of the deal. This could create a huge legal distraction for Twitter, with sentiment from day to day driving shares higher or lower.
On July 22, Twitter announced a $270 million loss for its June quarter, citing a decline in advertising driven by the uncertain economy and the distractions caused by the Musk buyout offer. Given that both of these factors are still affecting the company, it may be best for investors to take a wait-and-see approach with shares.
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