If you spend enough time in the stock market, you’ll inevitably run into consumer stocks. I like consumer stocks because they can be good buys during a robust economy.
It’s also possible to find some undervalued consumer stocks when the market takes a turn lower because some consumer segments are less resistant to recessions – particularly those stocks that deal with consumer staples and must-have purchases people make daily.
This could include companies that sell cleaning products, food, or over-the-counter medications.
On the other side of the coin are consumer discretionary stocks, which represent products people enjoy having but don’t need to function in their day-to-day lives. This could include entertainment products or vehicles.
Today’s market isn’t tough to define. While some analysts predict a recession in the future, inflation is beginning to drop and consumer spending remains somewhat elevated.
But that doesn’t mean that every consumer stock is a good purchase. In fact, there are plenty of duds out there that you should avoid if you want to get profitable returns. Here are seven that the Portfolio Grader suggests are a bad buy now.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) is an electric vehicle manufacturer that hasn’t met expectations. When it debuted, the company had high hopes for its first vehicle, the Lucid Air, named MotorTrend’s Car of the Year.
With that kind of beginning, you’d think the company would be in excellent shape. But that’s not the case. Growth and scale are problems. The company produced only 2,173 cars in the year’s second quarter, but that was a drop of nearly 200 vehicles from the previous quarter.
The stock price is down 24% since February and more than 80% since hitting its all-time high in early 2022. It didn’t help when Lucid announced a public offering of more than 173 million shares, which seriously diluted the value of existing shares.
Lucid announced a $232 million deal with automaker Aston Martin (OTCMKTS:ARGGY) to supply Aston Martin EV power train and battery systems. But I don’t expect that deal to have a long-term benefit.
LCID stock has a “D” rating in the Portfolio Grader.
GameStop (GME)
I can’t take an investment in GameStop (NYSE:GME) stock seriously. GameStop is the classic meme stock. In fact, it’s the stock that brought about the meme stock craze as Reddit investors got excited about playing the stock market in 2020.
Sure, some people made some money with the short squeeze, but many more lost. And while the influx of cash during the squeeze elevated GameStop’s stock price and allowed it to get on better financial footing, the growth story of this brick-and-mortar computer gaming retailer hasn’t improved.
Before the short squeeze, GameStop was a penny stock, trading at less than $4. Today it’s just over $20, which is an improvement.
The stock price is highly volatile based on the whims of Reddit retail investors, but you can’t seriously expect this one to go “to the moon” despite what your “diamond hands” are telling you.
GameStop has a market cap of about $7 billion now, but its valuation doesn’t measure up, so I don’t think the stock price or the market capitalization is sustainable.
While GME has some money set aside to potentially acquire to try to change the company, I don’t see the long-term picture changing. GME stock has a “D” rating in the Portfolio Grader.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) went along with GameStop as a meme stock favorite. The movie theater chain saw its stock run from less than $3 to more than $55.
AMC is plagued by the facts of life in the 21st century. People are more inclined to watch a movie at home via a streaming service than to go to a theater and pay $50 for a seat, popcorn and drinks for a similar experience. Most movies don’t open on a streaming service, but you can afford to wait if you’re patient.
AMC is betting that people will be eager to go to the theater – and to its credit, both Barbie and Oppenheimer opened to huge crowds and glowing reviews. But are there enough “Barbienheimer” weekends to sustain a movie theater chain? I don’t think so.
And that’s even before you consider the Hollywood strikes that will slow down movie production. AMC is already waving sounding alarms, with AMC CEO Adam Aron warning investors that AMC could run out of cash in 2024 or 2025 if it can’t raise equity capital.
Analysts expect AMC to generate nearly $500 million in losses this year on $4.5 billion in revenue. It’s spending $450 million just on interest payments on its debt. Further, AMC has $98 million in bonds expiring in 2025 and $1.5 billion due in 2026.
AMC stock gets a “D” rating in the Portfolio Grader.
Mullen Automotive (MULN)
Of all the sorry consumer stocks on this list, I can say that Mullen Automotive (NASDAQ:MULN) is the worst. And that’s saying something because the Portfolio Grader identified some bad consumer plays.
Mullen is an EV company aiming to make its mark with a lineup that includes a crossover, a sports car, a pickup truck and commercial vehicles. But it’s much more likely to go bankrupt before fulfilling its lofty expectations.
The stock is priced at only 13 cents – and that’s after a massive surge in early July when it announced a $25 million stock buyback program. Mullen also ended its Mullen Advanced Energy Operations agreement, which means Mullen lost access to energy management module technology needed to increase the range of EVs.
Mullen announced a nationwide tour to raise awareness for its EV fleet. I wouldn’t make time on my calendar for it. MULN stock is down more than 95% this year and has an “F” rating in the Portfolio Grader.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) is in the hydrogen fuel cell business. Its products replace conventional batteries in equipment and vehicles. The company is the largest buyer of liquid hydrogen in the U.S. and has deployed more than 60,000 fuel cell systems.
However, it’s not making money. Plug Power had an operating loss of $658 million last year, with revenues of only $701 million. It was the same old story in Q1 when Plug had $210.29 million in revenue and a net loss of $206.56 million.
It’s no wonder that PLUG stock is down 24% since February and 55% in the last two years.
Maybe people hope that the White House’s push for green energy solutions will be the path forward for Plug Power, but as long as the net margins are as bad as this, I’ll be staying away. PLUG stock has a “D” rating in the Portfolio Grader.
XPeng (XPEV)
I like an underdog story as much as anyone, and Chinese EV stock XPeng (NYSE:XPEV) is trying to do Rocky Balboa and get up from the mat to go another round.
Share of XPEV stock are up 26% on July 26, after the company announced a partnership with Volkswagen (OTCMKTS:VWAGY).
The deal calls for the German automaker to partner with XPeng to make two Volkswagen-branded EVs to sell in the Chinese market. Volkswagen is also taking a 5% stake in XPeng.
This sounds like a great deal for Volkswagen to enter the Chinese market. The benefits for XPeng, aside from the $700 million, aren’t as solid, but investors are buying up the stock.
XPEV delivered 8,620 EVs in June, up 15% from the previous month. And it’s starting deliveries on his G6 coupe SUV that launched June 29.
A lot is happening with XPEV stock, and the company’s rating may improve in light of the Volkswagen deal, particularly if it can continue to accelerate its production velocity. But it still has a “D” rating in the Portfolio Grader.
AT&T (T)
Ordinarily, I’d be all over a big dividend. Dividends are essential for income investors to supplement their retirement incomes or reinvest into their portfolios to increase their overall positions.
But AT&T (NYSE:T) is damaged goods in my eyes. Yes, it has a yield of 7.5% now. But investors can’t forget that the company cut its dividend in half just two years ago because times got tough for the telecommunications company.
That happened when AT&T spun off its cable TV and streaming and film segments.
The second quarter was a good one for the company (and for investors). AT&T had embarked on a cost-cutting campaign and said it achieved its goal to slice $6 billion a full year before expected. It hopes to trim another $2 billion over the next three years.
The cost-cutting helped T improve its free cash flow, which came in at $4.2 billion in free cash flow, or about $600 million more than analysts expected. Hopefully, that will persuade T not to cut the dividend again. The company has net debt of $132 billion, so the need to trim costs isn’t going away.
Despite AT&T’s solid second quarter, I’m still suspicious of this company. T gets a “D” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.