I spend most of my days searching the stock market for companies I want to invest in. Naturally, you’ll find some companies you like, and some that are neutral.
However, there are some that are best avoided for one reason or another.
This time we will introduce two such brands.
competitive concerns
First of all, boohoo (LSE:Boo). The fast fashion company grew significantly both before and during the pandemic.
But since then, the stock price has fallen off a cliff. It has now fallen 85% in five years. ah!
boohoo says on its website:Vision is to lead the fashion e-commerce market globally”.
The problem is that it isn’t. Shane appears to be leading the field, with profits reportedly doubling to more than $2 billion last year.That profit is almost equal to the total amount generated by Boohoo revenue last year!
Oh, and it looks like Shane will soon be going public and raising a huge war chest. This should allow him to continue selling tops and dresses for a few pounds each for years.
Meanwhile, boohoo reported a 17% year-on-year drop in revenue to £1.5bn in its last financial year (ending February 29). And its pre-tax loss widened to £159.9m from £90.7m a year earlier.
Now, fast fashion trends can change quickly. So perhaps customers will start ignoring all the choice and cheapness that Shein offers and start flocking to boohoo’s platform.
Shein is also said to pay less UK tax because it ships products directly to shoppers from China. Closing this loophole could level the playing field for the likes of Boohoo.
If that happens, the share price could rebound significantly from its current 34p.
But I’m not going to put money into that possible turnaround.
Meme stock madness is back
In my opinion, stock market speculation is once again on the rise.
For evidence of this, see below. Trump Media & Technology Group (NASDAQ: DJT). This is the parent company of Truth Social, Donald Trump’s alternative social network.
The company’s stock price has increased 62% over the past month.
I would expect that to happen if a company posted phenomenal revenue and profit growth. But that’s not the case here. Trump Media lost $58.2 million last year on net sales of just $4.1 million.
As a result, the company’s price-to-sales (P/S) ratio is at a surreal level of over 1,100 times. For context, a P/S multiple of 10 usually makes you feel a little nervous about investing in stocks.
My other concern here is that the company is not using the standard key performance indicators (KPIs) associated with social media companies. These include total users and average revenue per user (ARPU).
Without these metrics, investors have no idea how to track progress (or anything else). To me, this is also a big red flag.
Of course, if Donald Trump wins the next election, we could see a surge in users signing up for the Truth Social platform. This could cause stock prices to rise. So there you have it.
But buying stocks for these reasons seems more like gambling than investment to me. So I wouldn’t touch it with a 10 foot pole.
The post 2 Stocks Not Touching the Bargepole on the Stock Market Today appeared first on The Motley Fool UK.
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Ben McPoland has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The views expressed on the companies mentioned in this article are those of the writer and may differ from official recommendations we make on subscription services such as Share Advisor, Hidden Winners, or Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
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