Barron’s recently delved into the fluctuating world of stocks, shedding light on the heightened anticipation surrounding GameStop (NYSE:GME). Despite the uproar preceding its Q4 2023 earnings report, the buzz fizzled out like a dud firework.
In the lead-up to its earnings announcement, GameStop saw a surge of 7.8%, bringing its price to $14.12 on that heralded Monday morning. However, the aftermath of its lackluster earnings report saw a subsequent 15% drop, followed by an additional 13% decline over the following three days.
My disdain for GameStop and its CEO, Ryan Cohen, is no secret. I had previously urged investors to divest from this meme stock before its precipitous downfall on March 15. At the time, it was trading at $14.24 – a warning that has sadly come to fruition.
The current landscape only solidifies my stance. GameStop is a sinking ship, one among the trio of overhyped stocks that are best left on the wayside.
Not-So-Sweetgreen (SG)
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Sweetgreen (NYSE:SG) has seen a meteoric rise of 120% this year, a statistic that might turn heads but fails to tell the full story. Despite the analyst hype surrounding this healthy food provider, a closer look reveals a different narrative.
The recent optimism fueled by Oppenheimer analyst Brian Bittner, who doubled the target price to $34, might seem promising. However, with lingering doubts over Sweetgreen’s ability to hit revenue targets and navigate a competitive market, caution is advised.
Behind the scenes, Sweetgreen is exploring automated solutions to bolster its bottom line, aiming to achieve a lofty EBITDA margin of nearly 12% by 2028. In the grand scheme of things, with a mere breakeven in 2023 and an exorbitant IPO valuation, Sweetgreen’s allure falters under closer examination.
Maplebear’s Bumpy Ride (CART)
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Maplebear (NASDAQ:CART) has enjoyed a healthy 54% run this year, following its upbeat IPO debut at $30 per share. However, don’t let the numbers deceive you – there’s more than meets the eye.
While Maplebear boasts prestigious clients like Whole Foods, Kroger, and Costco, its bottom line tells a less prosperous tale. With a meager EBITDA margin of 2.1% and an ambiguous path to profitability, the future looks murky for this grocery delivery platform.
As the industry landscape evolves and economic uncertainties loom, Maplebear might find itself grappling with profit woes sooner rather than later.
CleanSpark’s Murky Waters (CLSK)
Lastly, we come to CleanSpark (NASDAQ:CLSK), an energy company navigating choppy waters in the stock market. Despite a commendable YTD boost of 35%, the fundamental underpinnings of this stock paint a less rosy picture.
With a checkered history of revenue fluctuations and a questionable path to sustained profitability, CleanSpark stands as a cautionary tale of euphoric stock valuations overshadowing underlying weaknesses. Investors would be wise to tread carefully in these volatile waters.
The Volatile Rise of CleanSpark (CLSK) Stock in 2024
Impressive Stock Performance Despite Recent Volatility
CleanSpark’s (NASDAQ: CLSK) has seen a remarkable surge in stock price, soaring by 50% in 2024 and an astonishing 505% over the past year. The company’s trajectory has been a rollercoaster ride, with shares plummeting by 10% in late March following an $800 million share offering that resulted in nearly 20% dilution of existing shares.
Capitalizing on Market Momentum
Despite the recent dip, accessing additional capital through the market after such significant gains is a strategic move for companies like CleanSpark. It’s emblematic of the very purpose of going public in the first place. While this maneuver can prove costly in the long run, it aligns with the pragmatic pursuit of growth. However, some critics argue that based on recent events, listing CLSK among overrated stocks worthy of divestment might not be unreasonable.
Strategic Expansion into Bitcoin Mining
In a strategic move in late February, CleanSpark acquired three Bitcoin mining data centers located in Mississippi for $19.8 million. These facilities possess an operational hashrate of 2.4 EH/s (exahashes per second), showcasing the company’s commitment to expanding its presence in the cryptocurrency mining sector.
Bitcoin Miners’ Acquisitions Analogous to Share Repurchases
Bitcoin miners’ acquisitions bear a resemblance to share repurchases in the traditional market landscape. Every CEO aspires to buy back shares at favorable prices, yet only a few successfully execute this strategy. CleanSpark’s foray into the Bitcoin mining arena reflects this parallel, indicating a nuanced approach to capital allocation.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
