Analysts are skeptical of these Robinhood stocks.
Trading app Robinhood has navigated a storm of controversy so far in 2021 following its decision to temporarily ban and restrict stocks targeted by groups of retail traders attempting to trigger short squeezes in some of the market’s most shorted stocks. The Reddit WallStreetBets community and other online traders coordinated a buying spree in GameStop (ticker: GME) and other stocks, sending their share prices temporarily soaring. Robinhood’s relatively young and inexperienced customer base has picked some huge market winners in the past year, but volatility remains high. Here are seven popular Robinhood stocks to sell immediately, according to Wall Street analysts.
The poster child of the recent WallStreetBets fiasco is video game retailer GameStop. Even prior to the health crisis, GameStop’s business was struggling to adapt to the gaming world’s transition from offline to online sales. GameStop revenue peaked back in 2012 and has been drifting steadily lower ever since. In 2019, the company reported a $673 million net loss. Bank of America analyst Curtis Nagle says even if GameStop navigates a tricky transition to a digital sales model, its profitability will likely take a big hit. Bank of America has an “underperform” rating and $10 price target for GME stock.
AMC Entertainment (AMC)
Popular movie theater chain AMC Entertainment is another one of the 100 most popular Robinhood stocks targeted by WallStreetBets. The short squeeze drove AMC shares up from below $2 in early January to above $20 during the buying frenzy. The stock has since dropped back down to around $6. The health crisis crushed the theater business, and AMC reported a $905 million net loss last quarter. CFRA analyst Tuna Amobi recently downgraded AMC and says the company’s liquidity position is “very tenuous.” CFRA has a “sell” rating and $2.50 price target for AMC.
American Airlines (AAL)
In 2020, American Airlines reported a $8.9 billion net loss, including a $2.2 billion loss in the fourth quarter. Revenue is still down 64% from a year ago. Bank of America analyst Andrew Didora says American has a solid liquidity position and has been opportunistic in raising capital throughout the crisis. However, he says American has the most levered balance sheet of all the major U.S. airlines and has a difficult path ahead in dealing with its $42.7 billion in long-term debt. Bank of America has an “underperform” rating and $5 price target for AAL stock.
The cruise industry is still completely shut down due to the health crisis, and Carnival has already suspended its cruises into May. Carnival’s fourth quarter revenue was down 99.3% from a year ago, and the company reported a $10.2 billion net loss in 2020. CFRA analyst Andrew Tam says Carnival’s stock is pricing in too much optimism after gaining nearly 60% in the last three months. Investors should expect heavy losses to continue in 2021, and there’s no guarantee travelers will return even once operations resume. CFRA has a “sell” rating and $14 price target for CCL stock.
Aurora Cannabis (ACB)
Cannabis stocks have caught fire since the November election on renewed optimism surrounding federal cannabis legalization in the U.S. Shares of Canadian legal cannabis producer Aurora Cannabis have tripled in the past three months alone. Cantor Fitzgerald analyst Pablo Zuanic says investors should be cautious with Aurora; he is anticipating Canadian sales growth will continue to disappoint. Of the 13 analysts that cover the stock, Aurora has four “sell” ratings and no “buy” ratings with an average price target of just $8.48. Cantor Fitzgerald has a “neutral” rating and $12.61 price target for ACB stock.
HEXO is another popular Canadian cannabis producer, and its shares are up 219% in the past three months. Zuanic is also cautious on Hexo and says the company is losing market share in Quebec and lagging behind Canadian peers in revenue growth. Recent capital raises have improved HEXO’s balance sheet. However, Zuanic estimates HEXO’s share count was up 88% year over year as of October, severely diluting investors. The 13 analysts covering HEXO have an average price target of just $4.07, suggesting nearly 50% downside from current levels. Cantor Fitzgerald has a “neutral” rating and 90-cent price target for HEXO stock.
MGM Resorts (MGM)
Some casino businesses were hit harder than others by the health crisis. Given its status as a vacation destination, casino stocks with high exposure to the Las Vegas Strip have struggled more than regional U.S. casino operators. MGM is highly exposed to Vegas, which is one of the reasons revenue was down 65.8% last quarter. Bank of America analyst Shaun Kelley says MGM has potential as a recovery play, but it is one of the worst-positioned U.S. casino stocks in the near-term. Bank of America has a “neutral” rating and $25 price target for MGM stock.
7 Robinhood stocks to sell immediately:
— GameStop (GME)
— AMC Entertainment (AMC)
— American Airlines (AAL)
— Carnival (CCL)
— Aurora Cannabis (ACB)
— HEXO (HEXO)
— MGM Resorts (MGM)
More from U.S. News