3 Stocks Facing an Imminent Decline in May
The stock market might be at an all-time high, but that doesn’t mean every security is trending higher. On the contrary, there are a number of stocks sinking. Whether due to poor earnings, declining finances or other bad news, some share prices are on the downswing as investors head for the exits. While it might be advisable to eventually bottom fish these names, investors should exercise caution in the near-term.
A lot of stocks that are sliding lower right now are doing so because the companies behind them have serious problems. These problems are not likely to be fixed quickly, and the share price could continue on a long downward trend. Spotting these underperforming names and avoiding them is important and can help keep a portfolio out of trouble. Here are three stocks facing imminent decline in May.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) has delivered another disappointing earnings print, sending its stock down 4%. Specifically, the cybersecurity firm reported quarterly billings that missed Wall Street forecasts, further hurting the share price. PANW stock is now down 18% since its previous financial results were delivered in February of this year. Having multiple misses on billings shows that businesses are spending less on cybersecurity as they struggle with inflation and an uncertain economy.
Palo Alto Networks managed to beat analysts’ expectations for profits and sales in its most recent quarter. The company reported EPS of $1.32, which topped estimates of $1.25. Revenue for what was the company’s fiscal third quarter came in at $1.98 billion, which was slightly above analyst expectations of $1.97 billion. Sales were up 15% from a year ago. Looking ahead, Palo Alto Networks said that it expects billings in the current quarter of $3.43 billion to $3.48 billion, which is inline with Wall Street estimates.
While PANW stock is still up 64% over the last 12 months, it’s definitely a stock facing decline in May.
Peloton Interactive (PTON)
On the day of this writing, the stock of Peloton Interactive (NASDAQ:PTON) is down 17% after the maker of internet-connected treadmills and exercise bikes said that it is undertaking a refinancing as it struggles with a cash crunch. The company said that it plans to offer $275 million in convertible senior notes due in 2029 in a private offering and enter a $1 billion five-year term loan and $100 million revolving credit facility.
Peloton plans to use the proceeds from the refinancing to buy back $800 million of its 0% convertible senior notes, which are currently due in 2026, and refinance an existing term loan. The refinancing announcement comes weeks after Peloton said that CEO Barry McCarthy is stepping down and that it planned to lay off 15% of its global workforce. The refinancing is designed to improve Peloton’s cash position as demand for its home-based fitness products continues to dwindle.
Over the last 12 months, PTON stock has fallen 55%. Through five years, the share price is down 87%.
Cracker Barrel Old Country Store (CBRL)
Shares of Cracker Barrel Old Country Store (NASDAQ:CBRL) have declined 20% since May 16, when the restaurant chain announced that it is cutting its quarterly dividend payment to shareholders by 80%. The move reduces the dividend to 25 cents a share from $1.30. Previously, Cracker Barrel had paid one of the highest yielding dividends around at 9.08%. The company, which operates combined restaurants and gift shops, said the dividend payout is being cut so that it can reallocate capital towards improving its brand.
News of the dividend reduction has clearly not sat well with investors. However, Cracker Barrel’s management team said the dividend cut is necessary as the company struggles with inflation, low consumer confidence and high interest rates. Cracker Barrel also warned that its upcoming fiscal third- and fourth-quarter results are likely to be below expectations due to weaker-than-anticipated customer traffic. No updated numbers were provided for the coming quarters.
CBRL stock is down more than 53% over the last 12 months. The share price continues to decline in May.
On the date of publication, Joel Baglole 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.
