Wall Street had its ups and downs last week. I thought my three stocks to avoid -- Tesla Motors (TSLA +3.37%), WD-40 (WDFC +0.25%), and Pool Corp. (POOL 0.35%) -- were going to lose to the market in the past week. They fell 8%, slipped 3%, and rose 2%, respectively. The final result was an average decline of 3% for the week.
The S&P 500 moved 0.7% higher. I was right. I've been correct in 58 of the past 92 weeks, or 63% of the time.
Let's turn our attention to the week ahead. I see AT&T (T +1.10%), Sonic Automotive (SAH +2.43%), and Pool Corp. (POOL 0.35%) as stocks you might want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
NASDAQ: TSLA
Key Data Points
1. AT&T
Not every stock has rallied this year. Shares of AT&T are down a dividend-adjusted 16%, having hit a new low last week. The telco giant has had its share of struggles lately, made worse by a penchant for lousy acquisitions and uninspiring organic growth.
A Wall Street Journal investigation earlier this month exposed the potential environmental risks of AT&T's lead-sheathed cables, and at least three major analysts have downgraded the stock since the problematic report. Could it get worse? Well, yes. AT&T reports fresh financials on Wednesday.
Image source: Getty Images.
Divestitures have resulted in three consecutive years of declining revenue at AT&T, but now we're seeing that organic growth is just as unimpressive. Analysts see AT&T posting a mere 1% increase in revenue for the third quarter in a row this week. Earnings growth is expected to go the wrong way.
Set aside the lead cables situation that will take years to play out. AT&T's core business is struggling right now. The stock's appeal is its juicy 7.5% yield, but a payout on a fading stock with weak financial prospects and a new red flag isn't very appetizing. There's also nearly $170 billion in debt here. It seems like a call that isn't worth answering.
NASDAQ: WDFC
Key Data Points
2. Sonic Automotive
It's not easy being a traditional auto retailer these days. Showrooms seem less busy with consumers fretting about big-ticket purchases in today's climate of recession fears and challenging financing costs. Sonic Automotive is a leading retailer with various brand-dedicated showrooms across the country.
This has rarely been a growth opportunity for investors. Sonic Automotive sales clocked in with meager single-digit gains for seven consecutive years before posting negative results in 2020 when the pandemic put the industry up on blocks. There was an understandable bounce in 2021 and 2022, but we're back to business as ho-hum usual at Sonic Automotive in 2023. Revenue rose just 1% in the first quarter, and this week's second-quarter performance is likely to be even worse.
Analysts see revenue taking a 2% dip when it reports on Thursday morning. Earnings per share are projected to take a 30% hit. This may seem like an easy bar to clear, but Sonic Automotive has fallen short of Wall Street's profit targets in three of the past four quarters. When it revs its engine later this week, it's not likely to roar.
NASDAQ: POOL
Key Data Points
3. Pool Corp.
The world's largest wholesale distributor of swimming pool and related backyard products was the one stock from my list last week to move higher, and I don't think the upticks were justified. Its quarterly report on Thursday morning was rough, and I think the market will realize it was a belly flop.
Sales fell 10% for the seasonally potent second quarter, worse than the 7% that Wall Street was expecting. Earnings per share plunged 30%, making this the third consecutive quarter in which its net income has fallen short of analyst profit targets. Pool Corp. also lowered its full-year earnings outlook.
The stock market is always on the move. If you're looking for safe stocks, you aren't likely to find them in AT&T, Sonic Automotive, or Pool Corp. this week.
