Uncertainty looms over the stock market as persistent macroeconomic challenges continue to pose risks. Adding to the unease is the mounting likelihood of an interest rate hike in June. Investors find themselves navigating a landscape of volatility, with the market’s future direction hanging in the balance.
Acknowledging these challenges, Finbold conducted an extensive review of the market, identifying five stocks that are currently facing headwinds and that investors should avoid trading in June.
Carvana (NYSE: CVNA)
Carvana (NYSE: CVNA), a growing online used car dealer, saw its share price soar a whopping 153.5% this year after it reported its best-adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for the first quarter, notably reduced costs, and improved its gross profit per unit (GPU).
At press time, Carvana’s shares are trading at $11.74, up more than 7.3% in the past 24 hours. Over the past month, the stock has gained roughly 51%.
However, despite its robust performance in 2023, market watchers are raising concerns over the current circumstances in the financing market as lenders tighten standards and the company’s substantial debt load of more than $9 billion. In addition, the company is not expected to reach profitability for at least four years.
Best Buy (NYSE: BBY)
Earlier this month, Best Buy (NYSE: BBY) reported Q1 2024 earnings that beat analyst estimates, however, sales missed expectations, and the retail giant reiterated expectations for lower spending on consumer electronics in the coming months.
The company also reaffirmed the outlook it issued in March, saying it expects full-year revenue in the range of $43.8 billion and $45.2 billion, representing a decline from the previous fiscal year. Further, it also anticipates comparable sales drop between 3% and 6%.
Although some bulls expect BBY to be approaching a cyclical trough, we believe that the company will not see strong growth momentum until the macro conditions improve.
At the time of writing, shares of Best Buy were standing at $74.33, up 4.28% on the day. Year-to-date, the stock remains down more than 8.1%.
Lucid (NASDAQ: LCID)
The electric vehicle (EV) market is expected to witness exceptional growth over the next two decades, indicating that prominent companies like Lucid (NASDAQ: LCID) could have a bright future if they stick around for that long.
However, in the shorter term, the Newark, California-based electric automaker is not well-positioned to compete with its rivals, due to soft demand for its vehicles as industry leader Tesla (NASDAQ: TSLA) continues to reduce prices to increase its market share. Moreover, Lucid’s operating losses surged nearly 30% to $774.1 million
The stock is trading at $7.87 at the time of publication, up 3.42% on the day. Over the past month, it has climbed 15%, while its year-to-date gains stand at 12.9%.
Fisker (NYSE: FSR)
Fisker is another EV manufacturer that has been struggling lately. After taking a long time to start production, the company delivered its first Ocean SUV this month following its partnership with Magna International – a manufacturing firm with great experience in vehicle production.
But while investors saw the delivery as a positive, the move is not expected to help Fisker’s production and revenue figures in the short run. The company recently trimmed its production outlook, and given that inflationary pressures persist, Finbold believes it is still early to bet on a carmaker producing luxury vehicles.
At the time of writing, FSR was down around 2% at $6.44. In the past month, the stock surged over 21%, though it remains down roughly 12.5% since the start of the year.
Radian Group (NYSE: RDN)
Mortgage insurance provider Radian Group (NYSE: RDN) has delivered an impressive performance in the stock market this year, rising over 33% year-to-date.
Meanwhile, as a result of this surge, RDN could have been overperforming, making the stock overvalued, according to our analysis.
At the moment, its shares trade at 3.45 times trailing sales, which is worse than nearly 90% of its market competition. Further, Radian’s revenue growth continues to impress, standing below 0% for the past three years.
RDN was changing hands at $25.64 at press time, up 1.63% in the past 24 hours and 10.7% over the past month.
Investors are facing a challenging and uncertain market landscape in the coming months as macroeconomic challenges persist and the possibility of an interest rate hike looms. In light of these circumstances, Finbold has identified CVNA, BBY, LCID, RDN, and FSR as the five stocks Finbold has analyzed above are ones that are expected to struggle next month and should be avoided for now.